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NORTH CAROLINA
DEPARTMENT OF REVENUE
2010 TAX LAW CHANGES
OFFICE OF THE ASSISTANT SECRETARY
FOR TAX ADMINISTRATION
501 N. Wilmington Street
PO Box 871
Raleigh, NC 27602- 0871
PREFACE
This document is designed for use by personnel in the North Carolina Department of
Revenue. It is available to those outside the Department as a resource document. It
gives a brief summary of the tax law:
􀁸 changes made by prior General Assemblies that take effect for tax year 2010, as
well as,
􀁸 changes made by the 2010 General Assembly, regardless of when they take
effect.
The local sales and use tax changes follow the State sales and use tax changes. The
document does not include law changes that affect the Department of Revenue but do
not affect the tax laws.
For further information on a tax law change, refer to the legislation that made the
change. Administrative rules, bulletins, directives, and other instructions issued by the
Department, as well as opinions issued by the Attorney General’s Office, may provide
further information on the application of a tax law change.
Thomas L. Dixon, Jr.
Assistant Secretary of Revenue
Tax Administration
TABLE OF CONTENTS
Section 1 – PERSONAL TAXES
INDIVIDUAL INCOME TAX
G. S. 105- 134.2A – Income Tax Surtax 1
G. S. 105- 134.6( d)( 7) – Other Adjustments to Taxable Income – Addition to Federal 1
Taxable Income for Certain Net Operating Losses ( NOLs)
G. S. 105- 134.6( d)( 8) – Other Adjustments to Taxable Income – Future Deduction 2
of NOL Addition
G. S. 105- 151.12( a) - Real Property Donated for a Conservation Purpose Can 2
Be Used Only for That Purpose
G. S. 105- 151.29( a)( 4) – Credit for Qualifying Expenses of a Production Company 2
G. S. 105- 151.29( b) – Credit for Qualifying Expenses of a Production Company 2
G. S. 105- 151.29( b1) – Alternate Credit for Qualifying Expenses of a Production 2
Company Repealed
G. S. 105- 151.29( d) – Qualifying Expenses of a Production Company Subject to Audit 3
G. S. 105- 151.29( f) – Credit Limit for Qualifying Expenses of a Production Company 3
Increased
G. S. 105- 159.1( a) – Reference to Political Party 3
TAX CREDIT SUNSETS
G. S. 105- 151.30( f) - Extend Sunset for Tax Credit for Recycling Oyster Shells 3
G. S. 105- 163.015 – Extend Sunset for Tax Credits for Qualified Business 3
Investments
Section 2 – CORPORATE, EXCISE AND INSURANCE TAXES
PRIVILEGE TAXES
G. S. 105- 37.1 – Conforming Change 4
G. S. 105- 37.1( a)( 1) – Gross Receipts Tax on Live Entertainment 4
G. S. 105- 37.1( a)( 2) – Gross Receipts Tax on Ticket Resales 4
G. S. 105- 37.1( a)( 3) – Repealed 4
G. S. 105- 37.1( d) – Local Taxes 5
G. S. 14- 344.1( a) – Internet Ticket Resale 5
TOBACCO PRODUCTS TAX
Chapter 58, Article 92 – Fire Safe Cigarettes 5
G. S. 58- 92- 10 – Definition of Brand Style 5
G. S. 58- 92- 15( p) – Fire Safe Cigarettes Standards Clarification 6
G. S. 105- 113.40A – Technical Correction 6
FRANCHISE TAX
G. S. 105- 122( b)( 1a)– Billings in Excess of Costs 6
G. S. 105- 122( c1)( 2) – Conforming Change 6
G. S. 105- 122( c1)( 3) – Alternative Apportionment Method, 15 Year Option 6
CORPORATION INCOME TAX
G. S. 105- 130.4( i) – Conforming Change 7
G. S. 105- 130.4( s1) – Special Apportionment Formula for a Qualified Capital 7
Intensive Corporation
G. S. 105- 130.4( t1) – Conforming Change 8
G. S. 105- 130.4( t2) – Alternative Apportionment Method, 15 Year Option 8
G. S. 105- 130.5( a)( 10) – Production Credit Not Subject to Add Back 8
G. S. 105- 130.6 – Rules for Combined Return 8
G. S. 105- 130.14 – Consolidated or Combined Returns 9
G. S. 105- 130.34( a) – Real Property Donated for a Conservation Purpose 9
G. S. 105- 130.41( C1) - Conforming Change to State Ports Authority Credit 9
G. S. 105- 130.45( f) - Conforming Change to Manufacturing Cigarettes for 9
Export Credit
G. S. 105- 130.46( k) - Conforming Change to Manufacturing Cigarettes for 9
Export While Increasing Employment and Use of State Ports Credit
G. S. 105- 130.47( a)( 4) – Definition of Qualifying Expenses 10
G. S. 105- 130.47( b) – Production Company Credit 10
G. S. 105- 130.47( b1) – Alternative Credit for Qualifying Expenses of a 10
Production Company Repealed
G. S. 105- 130.47( d) – Expense Verification 10
G. S. 105- 130.47( f) – Credit Limitation 11
G. S. 105- 130.47( h) – Report 11
G. S. 105- 130.48 – Sunset for Recycling Oyster Shells 11
NORTH CAROLINA LIMITED LIABILITY COMPANY
G. S. 57C- 2- 01 – Low- Profit Limited Liability Company 11
INSURANCE GROSS PREMIUMS TAX
G. S. 58- 6- 25 – Insurance Regulatory Charge 11
Section 3 – TAX CREDITS ( Applies to Multiple Schedules)
TAX INCENTIVES FOR NEW AND EXPANDING BUSINESS - ARTICLE 3A
G. S. 105- 129.2( 8a) – Conforming Change 12
G. S. 105- 129.6( b) – Conforming Change 12
BUSINESS AND ENERGY TAX CREDITS - ARTICLE 3B
G. S. 105- 129.15( 2) – Definition of Cost 12
G. S. 105- 129.15( 4b) – Definition of Installation 12
G. S. 105- 129.15( 7) – Definition of Renewable Energy Property Expanded 13
G. S. 105- 129.16A– Credit for Investing in Renewable Energy 13
G. S. 105- 129.16A – Credit Ceiling 13
G. S. 105- 129.16D( b1) – Technical Change 13
G. S. 105- 129.16D( d)– Sunset for Constructing Renewable Fuel Facilities 14
G. S. 105- 129.16F( b)– Sunset for Biodiesel Producers 14
G. S. 105- 129.16I – Credit for a Renewable Energy Property Facility 14
G. S. 105- 129.16J. – Temporary unemployment insurance refundable tax credit 14
G. S. 105- 129.19 – Conforming Change 15
TAX INCENTIVES FOR RECYCLING FACILITIES - ARTICLE 3C
G. S. 105- 129.25( 3) – Definition of Large Recycling Facility 15
G. S. 105- 129.26( b) – Large Recycling Facility Credit Repealed 15
G. S. 105- 129.26( e) – Conforming Change 15
G. S. 105- 129.27 – Large Recycling Facility Credit Repealed 15
HISTORIC REHABILITATION TAX CREDITS - ARTICLE 3D
G. S. 105- 129.38 – Conforming Change 15
G. S. 105- 129.39 – Sunset 15
LOW- INCOME HOUSING TAX CREDITS - ARTICLE 3E
G. S. 105- 129.44 - Conforming Change 16
TECHNOLOGY DEVELOPMENT - ARTICLE 3F
G. S. 105- 129.50( 2) – Definition of Full- Time Job 16
G. S. 105- 129.50( 4a) – Definition of Participating Community College 16
G. S. 105- 129.51 – Taxpayer Standards 16
G. S. 105- 129.54 – Report 16
G. S. 105- 129.55 – R& D in an Eco- Industrial Park 17
G. S. 105- 129.56 – Interactive Digital Media Credit 17
TAX INCENTIVES FOR MAJOR COMPUTER MANUFACTURING
FACILITIES - ARTICLE 3G
G. S. 105- 129.60 to 105- 129.66 – Repealed 18
MILL REHABILITATION TAX CREDIT - ARTICLE 3H
G. S. 105- 129.75 – Extend Sunset for Mill Rehabilitation Tax Credits 18
G. S. 105- 129.75A – Report 18
TAX CREDITS FOR GROWING BUSINESSES - ARTICLE 3J
G. S. 105- 129.81 – Definition of Environmental Disqualifying Event 19
G. S. 105- 129.82( a) – Sunset 19
G. S. 105- 129.83( e) – Environmental Impact 19
G. S. 105- 129.83( i) – Forfeiture 20
G. S. 105- 129.83( m) – No Double Benefit 20
G. S. 105- 129.85( b) - Conforming Change 20
TAX INCENTIVES FOR RAILROAD INTERMODAL FACILITIES –
ARTICLE 3K
G. S. 105- 129.98 - Conforming Change 20
TIER DESIGNATION
G. S. 143B- 437.08 – Development Tier Designation 20
Section 4 – SALES AND USE TAX
SALES AND USE TAX
G. S. 105- 164.3 – Definitions 21
G. S. 105- 164.4( a) – Increase in State Sales Tax Rate 21
G. S. 105- 164.4( a)( 6b) – Tax on Digital Property 22
G. S. 105- 164.4( a)( 1j) – Tax on Electricity Sold to Manufacturers and Farmers 22
G. S. 105- 164.4( a)( 3) – Accommodations 22
G. S. 105- 164.4B( e) – Sourcing Principles – Accommodations 23
G. S. 105- 164.13 – Exemptions and Exclusions 23
G. S. 105- 164.14( a1) – Passenger Plane Maximum 25
G. S. 105- 164.14( c) – Certain Governmental Entities 25
G. S. 105- 164.14( c)( 23) – Certain Governmental Entities 25
G. S. 105- 164.14( f) – Information to Counties and Cities 26
G. S. 105- 164.14( g) – Major Recycling Facilities 26
G. S. 105- 164.14( h) – Low Enterprise or Development Tier Machinery 26
G. S. 105- 164.14( j) – Certain Industrial Facilities 26
G. S. 105- 164.14( j)( 3) – Certain Industrial Facilities 26
G. S. 105- 164.14( k) – Reports 26
G. S. 105- 164.14( l) – Aviation Fuel for Motorsports Events 26
G. S. 105- 164.14( m) – Professional Motor Racing Vehicles 27
G. S. 105- 164.14( n) – Analytical Services Supplies 27
G. S. 105- 164.14( o) – Eligible Railroad Intermodal Facilities 27
G. S. 105- 164.14A – Economic Incentive Refunds 27
G. S. 105- 164.14B – Certain Industrial Facilities Refunds 27
G. S. 105- 164.15 – Secretary Shall Provide Forms 28
G. S. 105- 164.16( b1) – Returns and Payment of Taxes- Monthly 28
G. S. 105- 164.16( b2) – Returns and Payment of Taxes- Prepayment 28
G. S. 105- 164.16( d) – Use Tax on Out of State Purchases 28
G. S. 105- 164.29B - Information to Counties and Cities 28
G. S. 105- 164.44F – Distribution of part of telecommunications taxes to cities 29
G. S. 105- 164.44I – Distribution of part of sales tax on video programming and 29
telecommunications
G. S. 105- 164.44I( b) – Distribution of part of sales tax on video programming service 29
and telecommunications service to counties and cities
G. S. 105- 164.44J( b) – Supplemental PEG channel support 30
LOCAL SALES AND USE TAX
G. S. 105- 466( c) – Levy of Tax 30
G. S. 105- 467( b) – Exemptions and Refunds 30
G. S. 105- 487 – Use of Additional Tax Revenue by Counties 30
G. S. 105- 502– ( Effective October 1, 2009) Use of Additional Tax Revenue by 30
Counties
G. S. 105- 522 – City Hold Harmless for Repealed Local Taxes 31
G. S. 105- 523 – County Hold Harmless for Repealed Local Taxes 31
G. S. 105- 523( b)( 2) – County Hold Harmless for Repealed Local Taxes 32
HIGHWAY USE TAX – ARTICLE 5A
G. S. 105- 187.3( b) – Retail Value 32
G. S. 105- 187.6( a) – Full Exemptions 32
SCRAP TIRE DISPOSAL TAX – ARTICLE 5B
G. S. 105- 187.18( b) – Exemptions 32
G. S. 105- 187.19( b) – Use of Tax Proceeds 33
WHITE GOODS DISPOSAL TAX – ARTICLE 5C
G. S. 105- 187.23 – Exemptions and Refunds 33
G. S. 105- 187.24 – Use of Tax Proceeds 33
DRY- CLEANING SOLVENT TAX – ARTICLE 5D
G. S. 105- 187.33 – Exemptions and Refunds 33
MANUFACTURING FUEL AND CERTAIN MACHINERY AND
EQUIPMENT – ARTICLE 5F
G. S. 105- 187.50 – Definitions 33
G. S. 105- 187.51a.( 1) – Tax Imposed on Mill Machinery 34
G. S. 105- 187.51A – Privilege Tax on Manufacturing Fuel 34
G. S. 105- 187.51C – Tax Imposed on Datacenter Machinery and Equipment 34
G. S. 105- 187.51C( a)( 1) – Tax Imposed on Datacenter Machinery and Equipment 34
Section 5 􀀃 – 􀀃 PROPERTY TAX
PROPERTY TAX
G. S. 105- 275( 29a) — Historic Property 35
G. S. 105- 277.1C( b)( 1) — Disabled Veteran Property Tax Homestead Exclusion 35
G. S. 277.1D — Inventory Property Tax Deferral 35
G. S. 105- 278( b) — Historic Property 35
G. S. 105- 278.6( e) — Low or Moderate Income Housing 35
G. S. 105- 330.9 and G. S. 105- 330.11 — Motor Vehicles 36
G. S. 105- 333( 14) — Public Service Company 36
G. S. 105- 333( 21) — Motor Freight Carrier Terminal 36
G. S. 105- 501( b) — Reimbursement to the State for Local Government Services 36
G. S. 105A- 2 and G. S. 105A- 3( c) — Debt Set- Off 36
G. S. 153A- 340, G. S. 153A- 357( c)( 2) and G. S. 105- 360 — Currituck County and 36
Pasquotank County
G. S. 161- 31( b) — Payment of Delinquent Property Taxes 37
G. S. 161- 31 — Payment of Delinquent Property Taxes 37
G. S. 153A- 18( c) — Orange County and Alamance County Boundary 37
Section 6 – MOTOR FUELS
MOTOR FUELS
G. S. 105- 241( b)( 2a) – Reporting and Payment Requirement 38
G. S. 105- 449.37( a)( 1) – Update Reference to the IFTA Agreement 38
G. S. 105- 449.39 – Technical 38
G. S. 105- 449.40( a) – Technical 38
G. S. 105- 449.42 – Technical 38
G. S. 105- 449.42A – Technical 38
G. S. 105- 449.44( b) – Technical 38
G. S. 105- 449.45 – Technical 38
G. S. 105- 449.47A – Motor Carrier Registration Requirement 39
G. S. 105- 449.105A – Partial Repeal of Undyed Kerosene Refund by Distributors 39
G. S. 105- 449.105B – Technical 39
G. S. 105- 449.106( b) – Definition of Taxicab 39
G. S. 105- 449.106( c) – Clarification of Refund Eligibility for Special Mobile Equipment 39
G. S. 105- 449.108( b) – Technical 39
Section 7 – GENERAL ADMINISTRATION
GENERAL ADMINISTRATION
G. S. 105- 228.90( b)( 1b) – Reference to the Internal Revenue Code Updated 40
G. S. 105- 236( a)( 4) – Failure to Pay Penalty 40
G. S. 105- 236( a)( 5)( f) – Negligence Penalty and Combined Return 41
G. S. 105- 241.9( c)( 2a) – Written Notice Requirements 42
G. S. 105- 241.11( b) – Considered Filing Date of Request for Review 42
G. S. 105- 241.11( c) – Request for Review of Failure to Pay Penalty 42
G. S. 105- 241.16 – Judicial Review of Decision after Contested Case Hearing 42
G. S. 105- 241.22( 1) – Collection of Tax 42
G. S. 105- 242( b) – Attachment and Garnishment 43
G. S. 105- 242.1 – Garnishment by Electronic Means 43
G. S. 105- 256( a)( 2a) – Report 43
G. S. 105- 259( b)( 6a) – Conforming Change 43
G. S. 105- 259( b)( 18) – Disclosure 43
G. S. 105- 259( b)( 31) – Repealed 44
G. S. 105- 259( b)( 35) – Repealed 44
G. S. 105- 259( b)( 37) – Technical Change 44
G. S. 105- 259( b)( 40) – Disclosure 44
G. S. 105- 259( b)( 40) – Disclosure 44
G. S. 105- 259( b)( 41) – Disclosure 44
G. S. 105- 262 – Rules 45
G. S. 105- 263( a) – Timely Filing of Mailed Documents and Requests for Extensions 45
G. S. 105- 264( c) – Give Taxpayers Notice of Revised Tax Interpretations 45
SETOFF DEBT COLLECTION ACT- CHAPTER 105A
G. S. 105A- 2 Definitions 45
G. S. 105A- 3( c) Identifying Information 46
G. S. 105A- 14( a) Accounting to the Claimant Agency; Credit to Debtor’s Obligation 46
1
PERSONAL TAXES
INDIVIDUAL INCOME TAX
G. S. 105- 134.2A – Income Tax Surtax: The temporary surtax enacted by the 2009
General Assembly is also effective for the tax year 2010, and is set to expire for taxable
years beginning on or after January 1, 2011. The surtax is in addition to the income tax
imposed by G. S. 105- 134.2 and is computed by multiplying North Carolina income tax
by the applicable percentage determined by filing status and North Carolina taxable
income.
Notwithstanding G. S. 105- 163.15, no addition to tax may be made for tax years
beginning on or after January 1, 2009 and before January 1, 2011, with respect to an
underpayment of income tax to the extent the underpayment was created or increased
by the surtax.
( Effective for taxable years beginning on or after January 1, 2009 and expires for
taxable years beginning on or after January 1, 2011; SB 202, ss. 27A. 1.( b) and ( c); S. L.
09- 451.)
G. S. 105- 134.6( d)( 7) – Other Adjustments to Taxable Income – Addition to Federal
Taxable Income for Certain Net Operating Losses ( NOLs): Under the American
Recovery and Reinvestment Act ( ARRA), P. L. 111- 5, an Eligible Small Business ( ESB)
could elect to carry back an NOL from tax year 2008 for three, four, or five years, rather
than the standard two years. An eligible small business is defined in section
172( b)( 1)( H) of the Code. The Worker, Homeownership, and Business Assistance Act
of 2009 ( WHBAA) modified the ARRA by allowing businesses of every size to carry
back 2008 or 2009 NOLs for up to five years, but with a 50 percent of federal taxable
income limit on NOL offsets in the fifth year, and 100 percent in all remaining four carry
back years.
The General Assembly adopted the provisions of the WHBAA, but enacted adjustments
for certain taxpayers. Taxpayers must add to federal taxable income for tax years 2003,
2004, and 2005, any NOL deduction claimed under section 172( b)( 1)( H) or section
810( b)( 4) of the Code that is not an ESB loss. Similarly, taxpayers must add to taxable
income for tax years 2004, 2005, and 2006, any NOL deduction claimed under section
172( b)( 1)( H) or section 810( b)( 4) of the Code that is not an ESB loss.
( Effective June 30, 2010; SB 897, s. 31.1.( b), S. L. 10- 31.)
SECTION 1
2
G. S. 105- 134.6( d)( 8) – Other Adjustments to Taxable Income – Future Deduction
of NOL Addition: This subdivision was added to provide a future deduction from
federal taxable income for the addition required under G. S. 105- 134.6( d)( 7). A
deduction for one- third of the 2008 NOL absorbed on the 2003, 2004, and 2005 federal
returns or the 2009 NOL absorbed on the 2004, 2005, and 2006 federal returns is
allowed in tax years 2011, 2012, and 2013.
( Effective June 30, 2010; SB 897, s. 31.1.( b), S. L. 10- 31.)
G. S. 105- 151.12( a) - Real Property Donated for a Conservation Purpose Can Be
Used Only for That Purpose: This subsection was amended to clarify that the
property must be both donated and accepted in perpetuity for one of the purposes
stated in the law to qualify for the credit.
( Effective August 2, 2010; HB 1829, s. 5.( b), S. L. 10- 167.)
G. S. 105- 151.29( a)( 4) – Credit for Qualifying Expenses of a Production Company:
This subdivision was rewritten to add new subparagraphs d. and e. Qualifying
expenses now also include employee fringe contributions, including health, pension,
and welfare contributions, as well as per diems, stipends, and living allowances paid for
work being performed in this State.
( Effective for taxable years beginning on or after January 1, 2011 and applies to
expenses incurred for productions ending on or after that date; HB 1973, s. 2.2, S. L. 10-
147.)
G. S. 105- 151.29( b) – Credit for Qualifying Expenses of a Production Company:
This subsection was rewritten to increase the credit percentage from 15% to 25% of the
production company’s qualifying expenses.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.2, S. L.
10- 147.)
G. S. 105- 151.29( b1) – Alternate Credit for Qualifying Expenses of a Production
Company Repealed: The alternative credit included in subsection ( b1) by Senate Bill
943 for tax years beginning on or after January 1, 2010 has been repealed effective for
tax years beginning on or after January 1, 2011. The alternative credit allowed a credit
equal to 25% of the production company’s qualifying expenses less the difference
between the amount of tax paid on purchases subject to tax under G. S. 105- 187.51 and
the amount of sales and use tax that would have been due had the purchases been
subject to the sales and use tax at the combined rate under G. S. 105- 164.3.
( Effective for tax years beginning on or after January 1, 2011; HB 1973, s. 2.2, S. L. 10-
147.)
3
G. S. 105- 151.29( d) – Qualifying Expenses of a Production Company Subject to
Audit: Language was added to clarify that the qualifying expenses are subject to audit
by the Secretary before the credit is allowed.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.2, S. L.
10- 147.)
G. S. 105- 151.29( f) – Credit Limit for Qualifying Expenses of a Production
Company Increased : The subsection was amended to increase the tax credit
limitation from $ 7,500,000 to $ 20,000,000.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.2, S. L.
10- 147.)
G. S. 105- 159.1( a) – Reference to Political Party: This law provides that every
individual whose income tax liability for the tax year is $ 3.00 or more may designate on
his or her income tax return that $ 3.00 of the tax shall be credited to the North Carolina
Political Parties Financing Fund. In the case of a married couple filing a joint return
whose income tax liability is $ 6.00 or more, each spouse may designate on the return
that $ 3.00 of the tax shall be credited. This subsection was rewritten to clarify that
“ political party” has same meaning as defined in G. S. 163- 96.
( Effective July 17, 2010; SB 1177, s. 3, S. L. 10- 95.)
TAX CREDIT SUNSETS
G. S. 105- 151.30( f) - Extend Sunset for Tax Credit for Recycling Oyster Shells:
This subsection was rewritten to extend the sunset for the credit to tax years beginning
on or after January 1, 2013 ( was January 1, 2011).
( Effective July 22, 2010; HB 1973, s. 4.2, S. L. 10- 147.)
G. S. 105- 163.015 – Extend Sunset for Tax Credits for Qualified Business
Investments: The credit for qualified business investments was scheduled to expire for
investments made on or after January 1, 2011. The credit now expires for investments
made on or after January 1, 2013.
( Effective June 30, 2010; SB 897, s. 31.5.( b); S. L. 10- 31.)
4
CORPORATE, EXCISE AND
INSURANCE TAXES
PRIVILEGE TAXES
G. S. 105- 37.1 – Conforming Change: The catchline was rewritten to replace “ dances,
athletic events, shows, exhibitions, and other entertainments” with “ live entertainment
and ticket resales.” The new heading incorporates the expansion of the tax to
admission tickets resold over the internet.
( Effective June 30, 2010; SB 897, s. 31.7.( a), S. L. 10- 31.)
G. S. 105- 37.1( a)( 1) – Gross Receipts Tax on Live Entertainment: This subdivision
was rewritten to replace the references to specific types of entertain subject to the 3%
gross receipts tax set out in subdivisions ( 1), ( 2) and ( 3) with the general term, “ live
entertainment of any kind.” The value of amenities is excluded from the amount subject
to tax. If charges for amenities are not separately stated on the face of an admission
ticket, then the charge subject to the tax is equal to the charge for a ticket to the same
event for a seat that does not include amenities and is located directly in front of or
closest to the seat that includes amenities.
( Effective for charges for admission received on or after August 1, 2010; SB 897,
s. 31.7.( a), S. L. 10- 31.)
G. S. 105- 37.1( a)( 2) – Gross Receipts Tax on Ticket Resales: This subdivision was
rewritten to levy the 3% gross receipts tax on a person engaged in the business of
reselling admission tickets on the Internet under G. S. 14- 344.1( a). The price subject to
tax does not include the face price of the ticket. If the price is not printed on the ticket,
the price subject to tax is the amount charged for the ticket by the reseller less the
amount the reseller paid for the ticket.
( Effective for admission tickets sold on or after January 1, 2011; SB 897, s. 31.7.( a), S.
L. 10- 31.)
G. S. 105- 37.1( a)( 3) – Repealed: The provisions of this subdivision were incorporated
into subdivision ( 1) of this section. Therefore, this subdivision was repealed.
( Effective for admission tickets sold on or after January 1, 2011; SB 897, s. 31.7.( a), S.
L. 10- 31.)
SECTION 2
5
G. S. 105- 37.1( d) – Local Taxes: This subsection was amended to prohibit local
governments from levying a license tax on Internet ticket resellers. Under prior law, a
county was permitted to levy a license tax on events taxed under G. S. 105- 37.1( a)( 3).
This legislation repealed that subdivision and clarified that counties are prohibited from
imposing a license tax on any activity taxed under this section.
( Effective June 30, 2010; SB 897, s. 31.7.( a), S. L. 10- 31.)
G. S. 14- 344.1( a) – Internet Ticket Resale: Under existing law, a person may resell an
admission ticket on the Internet at a price greater than the face value if the venue where
the event will occur does not prohibit such activity and the reseller makes certain
guarantees to protect the purchaser. This section was amended to add an additional
provision requiring the reseller to collect and remit to the State the privilege tax levied
under G. S. 105- 37.1
( Effective June 30, 2010; SB 897, s. 31.7.( b), S. L. 10- 31.)
TOBACCO PRODUCTS TAX
Chapter 58, Article 92 – Fire Safe Cigarettes: This new article adopts a cigarette fire
safety standard already implemented in New York and other states as a safety measure
to reduce the likelihood that cigarettes will cause fires and result in deaths, injuries, and
property damage. The manufacturer must test cigarettes and file a certification with the
Department of Insurance that the cigarettes meet the safety standards. Each package
must be marked to indicate compliance with the safety act. Inventory on hand is
exempt from the marking requirement. However, the retailer or wholesaler must have
documentation to confirm that the cigarettes were purchased prior to the effective date
and that the quantity purchased was comparable to the cigarettes purchased during the
same period of the prior year. The act requires distributors, agents, and retail dealers to
submit to inspection of the products by the Commissioner of Insurance, the Secretary of
Revenue, or the Attorney General, and their employees. The act allows for seizure of
cigarettes in violation of this act by any law enforcement personnel or duly authorized
representative of the Commissioner of Insurance. Seized contraband is to be turned
over to the Department of Revenue for destruction after the manufacturer is given the
opportunity to inspect the cigarettes.
( Effective January 1, 2010; HB 1785, s. 1, S. L. 07- 451.)
G. S. 58- 92- 10 – Definition of Brand Style: This new subdivision was added to define
brand style as a variety of cigarettes distinguished by the tobacco used, tar and nicotine
content, flavoring used, size of the cigarette, filtration on the cigarette, or packaging.
This information is required in the certification submitted to the Commissioner of
Insurance.
( Effective July 1, 2010; HB 1905, s. 1, S. L. 10- 101.)
6
G. S. 58- 92- 15( p) – Fire Safe Cigarettes Standards Clarification: This subsection
was amended to clarify that the standards the Commissioner is to use to implement
Article 58 are in accordance with the “ New York Fire Safety Standards for Cigarettes” as
it read on August 24, 2007.
( Effective January 1, 2010; SB 884, s. 1, S. L. 09- 490.)
G. S. 105- 113.40A – Technical Correction: This section was amended to correct an
error. As originally written, net proceeds of the tax collected under this Article would be
allocated between the General Fund and the University Cancer Research Fund,
resulting in part of the tax on other tobacco products (“ OTP”) and all of the tax collected
on cigarettes being credited to the University Cancer Research Fund. However, the
intent of the section is to credit 3% of the cost price of other tobacco products to the
General Fund and the remainder of the net tax on other tobacco products to the
University Cancer Research Fund. The term “ Article” was replaced with “ Part”.
( Effective July 17, 2010; SB 1177, s. 1, S. L. 10- 95.)
FRANCHISE TAX
G. S. 105- 122( b)( 1a)– Billings in Excess of Costs: The 2009 General Assembly
enacted SB 367 which added this subdivision to specifically exempt billings in excess of
costs from surplus and undivided profits, thus excluding the amount from the
computation of the franchise tax capital stock base. The effective date was for taxable
years beginning on or after January 1, 2010. During the 2010 session, the General
Assembly amended the effective date, making it retroactive for taxable years beginning
on or after January 1, 2007. A taxpayer that included billings in excess of costs in its
franchise tax capital stock base in taxable years 2007, 2008, or 2009 may apply for a
refund. However, the request must be made no later than January 1, 2011. A request
made after that date is barred.
( Effective June 30, 2010; SB 897, ss. 31.9.( a), 31.9( b), S. L. 10- 31. Note: Franchise tax
levied under G. S. 105- 122 is for the income year of the corporation in which it becomes
due.)
G. S. 105- 122( c1)( 2) – Conforming Change: This subsection was amended to clarify
that the Secretary may grant a petition for alternative apportionment method for no more
than three years unless the provisions of new subdivision ( 3) apply.
( Effective for requests for alternative apportionment formulas filed on or after July 11,
2010; HB 713, s. 2( c), S. L. 10- 89.)
G. S. 105- 122( c1)( 3) – Alternative Apportionment Method, 15 Year Option: Under
existing law, a corporation that believes the statutory apportionment methodology
7
subjects a greater portion of its capital stock, surplus and undivided profits to tax than is
attributable to its business in the State may petition the Secretary for permission to use
an alternative method. This new subsection was added to permit the Secretary to grant
a qualifying corporation’s request for alternative apportionment for as many as fifteen
years rather than the three years allowed under subsection ( c1)( 2). To qualify, the
corporation must sign a letter of commitment with the Secretary of Commerce by
September 15, 2010 certifying that it will invest at least $ 500 million in private funds to
construct a facility in a development tier one area within five years after the time
construction begins.
( Effective for requests for alternative apportionment formulas filed on or after July 11,
2010; HB 713, s. 2( c), S. L. 10- 89.)
CORPORATION INCOME TAX
G. S. 105- 130.4( i) – Conforming Change: This subsection was rewritten to conform to
the new special apportionment provision for qualified capital intensive corporations in
G. S. 105- 130.4( s1).
( Effective for taxable years beginning on or after January 1, 2010; SB 575, s. 2, S. L. 09-
54.)
G. S. 105- 130.4( s1) – Special Apportionment Formula for a Qualified Capital
Intensive Corporation: This subsection was enacted to encourage the location and
expansion of capital intensive companies in North Carolina by providing for
apportionment of corporate income based solely on the sales factor for companies that
meet certain investment and quality jobs criteria. A qualified capital intensive
corporation is a corporation that meets all six of the following conditions:
􀁸 the corporation’s property factor exceeds 75% of the sum of its property, payroll,
and sales factors, with the sales factor added twice, for the current year or the
corporation’s average property factor for the preceding three years exceeds 75%
of the average sum of the factors for those years; 􀁸 the Secretary of Commerce makes a written determination that the corporation
has invested or is expected to invest at least one billion dollars in private funds to
construct a facility in this State within nine years after the time the construction
begins. The costs of acquiring and improving land for the facility, costs for
renovations or repairs for existing buildings, and costs of equipping or
reequipping the facility are all included as costs of construction; 􀁸 the corporation maintains the average number of employees it has at the facility
during the first two years after the facility is placed in service for the remainder of
the time in which the corporation must complete the investment; 􀁸 the facility is located in a county that was designated as a development tier one
or two area at the time construction began;
8
􀁸 the corporation satisfies the wage standard prescribed under G. S. 105- 129.83( c)
at the facility; 􀁸 the corporation provides health insurance as prescribed in G. S. 105- 129.83( d) for
all its full- time employees at the facility.
If the corporation fails to invest one billion dollars in private funds within nine years, the
benefit of the special apportionment formula expires and the corporation must apportion
income as otherwise required under G. S. 105- 130.4.
( Effective for taxable years beginning on or after January 1, 2010; SB 575, s. 1, S. L. 09-
54. If no corporation has qualified as a qualified capital intensive corporation prior to
January 1, 2019, then G. S. 105- 130.4( s1) is repealed effective for taxable years
beginning on after January 1, 2019; SB 575, s. 6, S. L. 09- 54.)
G. S. 105- 130.4( t1) – Conforming Change: This subdivision was amended to clarify
that the Secretary may grant a petition for alternative apportionment method for no more
than three years unless the provisions of new subdivision ( t2) apply.
( Effective for requests for alternative apportionment formulas filed on or after July 11,
2010; HB 713, s. 2( a), S. L. 10- 89.)
G. S. 105- 130.4( t2) – Alternative Apportionment Method, 15 Year Option: Under
existing law, a corporation that believes the statutory apportionment methodology
subjects a greater portion of its income to tax than is attributable to its business in the
State may petition the Secretary for permission to use an alternative method. This new
subsection was added to permit the Secretary to grant a qualifying corporation’s request
for alternative apportionment for as many as fifteen years rather than the three years
allowed under subsection ( t1). To qualify, the corporation must sign a letter of
commitment with the Secretary of Commerce by September 15, 2010 certifying that it
will invest at least $ 500 million in private funds to construct a facility in a development
tier one area within five years after the time construction begins. A similar provision
was enacted for franchise tax.
( Effective for requests for alternative apportionment formulas filed on or after July 11,
2010; HB 713, s. 2( b), S. L. 10- 89.)
G. S. 105- 130.5( a)( 10) – Production Credit Not Subject to Add Back: This
subdivision was amended to specifically exempt the production credit allowed under
G. S. 105- 130.47 from the addition to federal taxable income required for amounts
claimed as credits against the corporate income tax.
( Effective for taxable years beginning on or after January 1, 2011; HB 713, s. 1, S. L. 10-
89.)
G. S. 105- 130.6 – Rules for Combined Return: This section was amended to permit
the Secretary to adopt rules that describe the facts and circumstances under which the
9
Secretary will require a corporation to file a combined return. The Secretary will not be
prohibited from requiring a combined return based on facts and circumstances not
described in the rules if he finds that a return filed by a taxpayer does not disclose its
true earnings in the State.
( Effective June 30, 2010; SB 897, s. 31.10.( d), S. L. 10- 31.)
G. S. 105- 130.14 – Consolidated or Combined Returns: This section requires a
corporation that files a consolidated federal income tax return to file a separate entity
return for State purposes unless required by the Secretary to file a consolidated or
combined return. The section was amended to add two other conditions under which a
combined return will be permitted. If the Secretary promulgates rules under G. S. 105-
130.6 setting out the facts and circumstances under which the Secretary will require a
combined return, a corporation whose facts and circumstances meet those of the rule
must file a combined return in accordance with the rules. Additionally, when a
corporation makes a written request of the Secretary and the Secretary provides written
advice based on the facts and circumstances provided by the corporation that he will
require a combined return, the corporation will file a combined returned in accordance
with the written advice.
( Effective June 30, 2010; SB 897, s. 31.10.( e), S. L. 10- 31.)
G. S. 105- 130.34( a) – Real Property Donated for a Conservation Purpose: This
subsection was amended to clarify that the property must be both donated and
accepted in perpetuity for one of the purposes stated in the statute to qualify for the
credit.
( Effective August 2, 2010: HB 1829, s. 5.( a), S. L. 10- 167.)
G. S. 105- 130.41( C1) - Conforming Change to State Ports Authority Credit: To
increase uniformity in reporting requirements for tax credits, a new subdivision was
added to G. S. 105- 256( a). This subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.11, S. L. 10- 166.)
G. S. 105- 130.45( f) - Conforming Change to Manufacturing Cigarettes for Export
Credit: To increase uniformity in reporting requirements for tax credits, a new
subdivision was added to G. S. 105- 256( a). This subsection was amended to reference
the new statute.
( Effective July 1, 2010; SB 1215, s. 1.12, S. L. 10- 166.)
G. S. 105- 130.46( k) - Conforming Change to Manufacturing Cigarettes for Export
While Increasing Employment and Use of State Ports Credit: This section was
amended to replace the existing reporting requirement with a reference to the new
economic incentives report required under G. S. 105- 256 and to set out what information
10
is to be included in that report. The following information will be reported and itemized
by taxpayer: 􀁸 The number of taxpayers who took the credit, 􀁸 The amount of cigarettes and other tobacco products exported through the State
ports with respect to which credits were taken, 􀁸 The percentage of domestic leaf content in cigarettes produced during the
previous year, and 􀁸 The total cost to the General Fund.
( Effective July 1, 2010; SB 1215, s. 1.13, S. L. 10- 166.)
G. S. 105- 130.47( a)( 4) – Definition of Qualifying Expenses: This subdivision was
amended to add employee fringe contributions, including health, pension, and welfare
contributions, as well as per diems, stipends, and living allowances paid for work being
performed in the State to the list of expenses that qualify for the production credit.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.1, S. L.
10- 147.)
G. S. 105- 130.47( b) – Production Company Credit: This subsection was amended to
increase the credit percentage from 15% of the production company’s qualifying
expenses to 25%.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.1, S. L.
10- 147.)
G. S. 105- 130.47( b1) – Alternative Credit for Qualifying Expenses of a Production
Company Repealed: This subsection was added during the 2009 session of the
General assembly to provide an election in computing the amount of credit for qualifying
expenses. In lieu of the existing 15% credit, the taxpayer could choose to compute the
credit at 25%. However, it was required to forfeit the benefit of the special sales tax rate
imposed on mill machinery under G. S. 105- 187.51 by subtracting from the amount of
credit computed at 25% the difference between the amount of tax paid on purchases
subject to the mill machinery rate of 1% and the amount of sales or use tax that would
have been due had the purchases been subject to the combined sales tax rate. The
2010 General Assembly repealed the section.
( Alternative Credit effective for taxable years beginning on or after January 1, 2010; SB
943, s. 1, S. L. 09- 529. Repeal effective for taxable years beginning on or after January
1, 2011; HB 1973, s. 2.1, S. L. 10- 147.)
G. S. 105- 130.47( d) – Expense Verification: This subsection was amended to clarify
that qualifying expenses are subject to audit before the credit is allowed.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.1, S. L.
10- 147.)
11
G. S. 105- 130.47( f) – Credit Limitation: This subsection was amended to increase the
ceiling of the production credit from $ 7.5 million to $ 20 million.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.1, S. L.
10- 147.)
G. S. 105- 130.47( h) – Report: To increase uniformity in reporting requirements for tax
credits, a new subdivision was added to G. S. 105- 256( a). This subsection was
amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.14, S. L. 10- 166.)
G. S. 105- 130.48 – Sunset for Recycling Oyster Shells: This subsection was
amended to extend the sunset for two years. The credit is repealed effective for taxable
years beginning on or after January 1, 2013.
( Effective July 22, 2010; HB 1973, s. 4.1, S. L. 10- 147.)
NORTH CAROLINA LIMITED LIABILITY COMPANY
G. S. 57C- 2- 01 – Low- Profit Limited Liability Company: This new section permits the
formation of a low- profit limited liability company. The name of the entity must contain
the words “ low- profit limited liability company” or “ LC3”. Its purpose is to encourage
investment in struggling businesses, particularly by nonprofit organizations. An LC3’ s
articles of organization will state that it is formed for both a business and a charitable
purpose. However, it is considered a for- profit entity. If it fails to comply with its
charitable purpose requirements, it remains a regular LLC. To meet the charitable
purpose requirements, it must accomplish a charitable or educational purpose, its
principal purpose of operation is not the production of income or appreciation of
property, and it operates for no political or legislative purpose.
( Effective August 3, 2010; SB 308, s. 1, S. L. 10- 187.)
INSURANCE GROSS PREMIUMS TAX
G. S. 58- 6- 25 – Insurance Regulatory Charge: The percentage rate to be used in
calculating the insurance regulatory charge under this statute is 5.5% for the 2009
calendar year and 6% for the 2010 calendar year. This charge is a percentage of gross
premiums tax liability.
( Effective August 7, 2009; SB 202, ss. 21.1.( a) - 21.1.( b), S. L. 09- 451.)
12
TAX CREDITS
( Applies to Multiple Schedules)
TAX INCENTIVES FOR NEW AND EXPANDING BUSINESS –
ARTICLE 3A
G. S. 105- 129.2( 8a) – Conforming Change: This subdivision was amended to correct a
statutory reference to a sales tax statute in the definition of eligible major industry.
( Effective July 1, 2010; SB 1215, s. 3.2, S. L. 10- 166.)
G. S. 105- 129.6( b) – Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.1, S. L. 10- 166.)
BUSINESS AND ENERGY TAX CREDITS - ARTICLE 3B
G. S. 105- 129.15( 2) – Definition of Cost: This subsection was amended to add a new
provision for leased property. If the taxpayer claims either a federal energy credit under
section 48 of the Code or a federal grant in lieu of that credit and makes a lease pass-through
election under the Code, the cost of the leased renewable energy property is
the cost determined under the Code rather than eight times the net annual rental rate.
( Effective for taxable years beginning on or after January 1, 2010; HB 1829, s. 2.( a), S. L.
2010- 167.)
G. S. 105- 129.15( 4b) – Definition of Installation: This new subsection was added to
define installation of renewable energy property as property that, standing alone or in
combination with other machinery, equipment, or real property, is able to produce
usable energy on its own.
( Effective for taxable years beginning on or after January 1, 2010; HB 1829, s. 2.( a), S. L.
2010- 167.)
SECTION 3
13
G. S. 105- 129.15( 7) – Definition of Renewable Energy Property Expanded: This
section was amended to add a subsection to expand the definition of renewable energy
property to include combined heat and power system property as defined in section 48
of the Code. Additionally, the definition of wind equipment was expanded to include
equipment required to relay the electricity by cable from the turbine motor to the power
grid. The section was also amended to combine two existing subsections, ( e) and ( f),
that define types of geothermal equipment into one subsection, ( c).
( Effective for taxable years beginning on or after January 1, 2010; HB 1829, s. 2.( a), S. L.
2010- 167.)
G. S. 105- 129.16A– Credit for Investing in Renewable Energy Property: This section
was amended by two separate pieces of legislation. In the first, amendments made to
the renewable energy property credit against North Carolina personal and corporate
income, corporate franchise, and insurance gross premium taxes clarify that the credit
may be claimed for property for which a taxpayer has received federal renewable
energy grants authorized under the American Recovery and Reinvestment Tax Act of
2009. Under the North Carolina statute, taxpayers are precluded from claiming the
credit for property purchased with public funds. The modifications made by this
legislation specify that the Recovery Act grants are not considered public funds for
purposes of this credit.
The second legislation added a provision to require a lessor of renewable energy
property to provide to the lessee a statement that describes the property and states the
cost of the property. It also replaced the terms nonresidential property and residential
property with the terms business and nonbusiness, respectively. Business property
generates useful energy that is offered for sale or is used on- site for a purpose other
than providing energy to a residence.
( Legislation enacted regarding public funds is effective for taxable years beginning on or
after January 1, 2009 and applies to renewable energy property placed in service on or
after that date; SB 388, s. 1, S. L. 2010- 4. The second legislation is effective for taxable
years beginning on or after January 1, 2010; HB 1829, s. 2.( b), S. L. 2010- 167.)
G. S. 105- 129.16A – Credit Ceiling: This new subdivision was added to place a ceiling
of $ 5,000,000 on each installation of renewable energy property placed in service at an
Eco- Industrial Park as defined in G. S. 143B- 437.08.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 5.4, S. L.
10- 147.)
G. S. 105- 129.16D( b1) – Technical Change: This subsection was rewritten to correct a
statutory reference. G. S. 105- 241.1( i) was replaced with G. S. 105- 241.21regarding
interest rate.
( Effective July 17, 2010; SB 1177, s. 2, S. L. 10- 95.)
14
G. S. 105- 129.16D( d)– Sunset for Constructing Renewable Fuel Facilities: This
subsection was amended to extend the sunset. The credit will expire for facilities placed
in service on or after January 1, 2013.
( Effective August 2, 2010; HB 1829, s. 1( a), S. L. 10- 167.)
G. S. 105- 129.16F( b)– Sunset for Biodiesel Producers: This subsection was amended
to extend the sunset. The credit will expire for tax years beginning on or after January 1,
2013.
( Effective August 2, 2010; HB 1829, s. 1( b), S. L. 10- 167.)
G. S. 105- 129.16I – Credit for a Renewable Energy Property Facility: This new
section reinstates and expands the credit for constructing a facility to manufacture
renewable energy property in this State which was codified under G. S. 105- 130.28 and
expired in 2006. The credit is 25% of the cost to construct or convert and equip a
facility to manufacture renewable energy property or a major component subassembly
for a solar array or a wind turbine. The credit is taken in five equal installments
beginning in the year the property is placed in service. If the property is disposed or
taken out of service during any year in which an installment of the credit accrues, the
credit expires and the taxpayer may not take any remaining installments. It may,
however, take any carry forward amount of a previous installment, subject to the five
year carry forward limitation.
( Effective for taxable years beginning on or after January 1, 2011 and expires for
facilities placed in service on or after January 1, 2014; HB 1829, s. 3.( a), S. L. 10- 167.)
G. S. 105- 129.16J. – Temporary unemployment insurance refundable tax credit:
A new section was added to allow a tax credit for small businesses that make
contributions to the State Unemployment Insurance Fund with respect to wages paid for
employment in this State. A small business is defined as a business whose cumulative
gross receipts from the business activity for the tax year do not exceed one million
dollars ($ 1,000,000). The amount of tax credit allowed is 25% of the qualified
contributions to the State Unemployment Insurance Fund and applies to taxable years
2010 and 2011 only.
This credit may be claimed only against corporate and individual income taxes. If the
credit exceeds the amount of tax for the taxable year reduced by the sum of all credits
allowable, the excess is refundable. The refundable excess is governed by the
provisions governing a refund of an overpayment by the taxpayer of the tax imposed in
Article 4. In computing the amount of tax against which multiple credits are allowed,
nonrefundable credits are subtracted before refundable credits.
( Effective for taxes imposed for taxable years beginning on or after January 1, 2010; SB
897; s. 31.1A.( a), S. L. 10- 31.)
15
G. S. 105- 129.19 – Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.2, S. L. 10- 166.)
TAX INCENTIVES FOR RECYCLING FACILITIES - ARTICLE 3C
G. S. 105- 129.25( 3) – Definition of Large Recycling Facility: This subdivision was
deleted because the tax credit for large recycling facilities was repealed.
( Effective July 1, 2010; SB 1215, s. 2.1, S. L. 10- 166.)
G. S. 105- 129.26( b) – Large Recycling Facility Credit Repealed: This subsection was
repealed because the credit for a large recycling facility has never been claimed. Only
the credit for major recycling facility remains.
( Effective July 1, 2010; SB 1215, s. 2.1, S. L. 10- 166.)
G. S. 105- 129.26( e) – Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.3, S. L. 10- 166.)
G. S. 105- 129.27 – Large Recycling Facility Credit Repealed: This section was
rewritten to delete the language that provided a 20% credit for machinery and
equipment placed in service in a large recycling facility. The credit was never claimed.
( Effective July 1, 2010; SB 1215, s. 2.1, S. L. 10- 166.)
HISTORIC REHABILITATION TAX CREDITS - ARTICLE 3D
G. S. 105- 129.38 – Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.4, S. L. 10- 166.)
G. S. 105- 129.39 – Sunset: This section was added to establish a sunset. The credit will
expire for qualified rehabilitation expenses and rehabilitation expenses incurred on or
after January 1, 2014.
( Effective July 1, 2010; SB 1215, s. 1.5, S. L. 10- 166.)
16
LOW- INCOME HOUSING TAX CREDITS - ARTICLE 3E
G. S. 105- 129.44 - Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.6, S. L. 10- 166.)
TECHNOLOGY DEVELOPMENT - ARTICLE 3F
Title Change – The title of Article 3F, Research and Development, was rewritten to
read “ Technology Development” in order to accommodate the new credit for developing
interactive digital media.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 3.1, S. L.
10- 147.)
G. S. 105- 129.50( 2) – Definition of Full- Time Job: This subsection was amended to
add the definition of full- time job to Article 3F and cross- references the definition to
Article 3J, which is a position that requires at least 1,600 hours of work per year and is
intended to be held by one employee during the entire year.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 3.2, S. L.
10- 147.)
G. S. 105- 129.50( 4a) – Definition of Participating Community College: This
subsection was added to define a participating community college as one that offers an
associate in applied science degree in simulation and game development.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 3.2, S. L.
10- 147.)
G. S. 105- 129.51 – Taxpayer Standards: This section was amended to expand the
requirements for eligibility for the credits in Article 3F. In addition to satisfying the
requirements related to the wage standard, health insurance, environmental impact,
and safety and health programs, the taxpayer must also have no overdue tax debts.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 3.3, S. L.
10- 147.)
G. S. 105- 129.54 – Report: This section was amended by two pieces of legislation. As
originally written, the section required the Department to publish a report specific to the
Research and Development credit, itemizing the report by taxpayer. The first
amendment deletes the requirement for a separate report and instead sets out the
17
details that are to be included in a new economic incentives report required under G. S.
105- 256.
The second amendment expands the reporting requirement. With the addition of the
interactive digital media credit to Article 3F, the amended statute requires the
Department to itemize the report by type of credit as well as by taxpayer. Additionally,
with respect to the Research and Development credit, the report must be itemized by
categories of small business, low- tier, university research, other and a new zone
designation, Eco- Industrial Park. The interactive digital media credit must be itemized
by the categories of higher education collaboration and other.
( The amendment to cross reference G. S. 105- 256 is effective July 1, 2010; SB 1215, s.
1.7, S. L. 10- 166. The second amendment is effective for taxable years beginning on or
after January 1, 2011; HB 1973, s. 3.5, S. L. 10- 147.)
G. S. 105- 129.55 – R& D in an Eco- Industrial Park: This section was amended to
create a new category of expense eligible for the research and development credit. A
taxpayer that has qualified North Carolina research expenses is allowed a credit equal
to a percentage of the expenses. The percentage is dependent upon the category
under which the expense falls. The new category is an Eco- Industrial Park certified
under G. S. 143B- 437.08. The percentage of expenses with respect to research
performed in an Eco- Industrial Park is 35%.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 5.5, S. L.
10- 147.)
G. S. 105- 129.56 – Interactive Digital Media Credit: This new section creates a credit
for an industry that develops in this State interactive digital media (“ IDM”) or a digital
platform or engine for use in interactive digital media. IDM is a product that is produced
for distribution on electronic media, including distribution over the Internet, contains a
computer- controlled virtual universe with which an individual interacts in order to
achieve a goal, and contains a significant amount of at least three of the following types
of data: animated images, fixed images, sound, text, and 3D geometry.
The credit is equal to a percentage of the taxpayer’s expenses that exceed $ 50,000.
Qualifying expenses are compensation and wages for a full- time job on which
withholding payments are remitted, employee fringe contributions on compensation and
wages, including health, pension, and welfare contributions, and amounts paid to a
participating community college or a research university for services performed in this
State. The credit is equal to 20% of the allowable expenses paid to a participating
community college or a research university. The credit for other allowable expenses is
limited to 15%. The credit may not exceed $ 7.5 million.
The following types of interactive digital media do not qualify for the credit: 􀁸 developed by the taxpayer for internal use, 􀁸 interpersonal communications service, such as videoconferencing, wireless
telecommunication, a text- based channel, or a chat room,
18
􀁸 an internet site that is primarily static and primarily designed to provide
information about a person or business, 􀁸 gambling or casino game, 􀁸 political advertising, 􀁸 is obscene as defined in G. S. 14- 190.1or is harmful to minors as defined in
G. S. 14- 190.13.
A taxpayer claiming the IDM credit may not claim any other credit under chapter 105 or
a JDIG or One North Carolina Fund grant with respect to the expenses used to
determine the IDM credit. Like the Research and Development credit, the taxpayer
must make a binding election to claim the IDM credit against the income taxes levied in
Article 4 or franchise tax levied in Article 3 and the credit is limited to 50% of the tax.
Unused portions of the credit may be carried forward for 15 years.
( Effective for taxable years beginning on or after January 1, 2011, HB 1973, s. 3.6, S. L.
10- 147.)
TAX INCENTIVES FOR MAJOR COMPUTER MANUFACTURING
FACILITIES - ARTICLE 3G
G. S. 105- 129.60 to 105- 129.66 – Repealed: This Article was repealed.
( Effective July 1, 2010; SB 1215, s. 2.2, S. L. 10- 166.)
MILL REHABILITATION TAX CREDIT - ARTICLE 3H
G. S. 105- 129.75 – Extend Sunset for Mill Rehabilitation Tax Credits: This section
was rewritten to extend the sunset of the Article 3H credits to January 1, 2014, for
rehabilitation projects for which an application for eligibility certification is submitted on
or after that date ( was January 1, 2011).
( Effective June 30, 2010; SB 897, s. 31.5.( a); S. L. 10- 31.)
G. S. 105- 129.75A – Report: This new section was added to set out what information is
to be included in the economic incentives report required under G. S. 105- 256. The
following information will be reported and itemized by taxpayer: 􀁸 The number of taxpayers that took a mill rehabilitation credit, 􀁸 The amount of rehabilitation expenses and qualified rehabilitation expenditures
with respect to which credits were taken, and 􀁸 The total cost to the general fund.
( Effective July 1, 2010; SB 1215, s. 1.8, S. L. 10- 166.)
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TAX CREDITS FOR GROWING BUSINESSES - ARTICLE 3J
G. S. 105- 129.81 – Definition of Environmental Disqualifying Event: This new
subdivision was added to define events that would result in a taxpayer’s disqualification
for Article 3J credits. Those events include:
A civil penalty assessed against the taxpayer by the Department of Environment and
Natural Resources (“ DENR”) during the tax year in which the activity occurred for which
a credit is being claimed for failure to comply with an order issued by an agency of that
Department to abate or remediate a violation of any program administered by the
agency;
A finding by DENR that the taxpayer, during the tax year in which the activity occurred
for which a credit is being claimed or in the two prior tax years, knowingly and willfully
committed a violation of any program implemented by a DENR agency or was assessed
for damages to fish or wildlife or was issued a judicial order for injunctive relief in
connection with a violation of any DENR program;
A criminal penalty was imposed against the taxpayer in connection with any DENR
agency during the tax year in which the activity occurred for which a credit is being
claimed or in the four prior tax years.
( Effective for credits claimed for taxable years beginning on or after January 1, 2007;
HB 1973, s. 1.3, S. L. 10- 147.)
G. S. 105- 129.82( a) – Sunset: This subdivision was amended to extend the sunset for
two more years. The credit will expire for business activities that occur on or after
January 1, 2013.
( Effective July 22, 2010; HB 1973, s. 1.1, S. L. 10- 147.)
G. S. 105- 129.83( e) – Environmental Impact: This subdivision of the Eligibility and
Forfeiture section was amended to modify the circumstances under which a taxpayer
becomes ineligible for Article 3J credits due to violations of programs administered by
the Department of Environmental and Natural Resources (“ DENR”). A taxpayer
becomes ineligible if there has been a final determination unfavorable to the taxpayer
with respect to an environmental disqualifying event, defined in G. S. 105- 129.81. A
final determination occurs when there is no further opportunity for the taxpayer to seek
administrative or judicial review of the disqualifying event and the disqualifying event
has not been reversed or withdrawn. DENR will provide to the Department by January
31 of each year a list of all environmental disqualifying events for which a final
determination unfavorable to the taxpayer was made during the prior calendar year,
including the taxpayer name and the date the disqualifying event occurred.
( Effective for credits claimed for taxable years beginning on or after January 1, 2007;
HB 1973, s. 1.4, S. L. 10- 147.)
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G. S. 105- 129.83( i) – Forfeiture: This subdivision of the Eligibility and Forfeiture section
was amended to add a provision that will require a taxpayer to forfeit an Article 3J credit
previously allowed if a final determination unfavorable to the taxpayer with respect to an
environmental disqualifying event is made that is applicable to the year in which the
activity occurred for which the credit was claimed.
( Effective for credits claimed for taxable years beginning on or after January 1, 2007;
HB 1973, s. 1.4, S. L. 10- 147.)
G. S. 105- 129.83( m) – No Double Benefit: This subsection was enacted to prohibit a
corporation that qualifies for the new special apportionment formula for qualified capital
intensive corporations in G. S. 105- 130.4( s1) from also claiming any tax credits under
Article 3J with respect to the facility that caused the corporation to be a qualified capital
intensive corporation.
( Effective for taxable years beginning on or after January 1, 2010; SB 575, s. 3, S. L. 09-
54.)
G. S. 105- 129.85( b) - Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.9, S. L. 10- 166.)
TAX INCENTIVES FOR RAILROAD INTERMODAL FACILITIES –
ARTICLE 3K
G. S. 105- 129.98 - Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.10, S. L. 10- 166.)
TIER DESIGNATION
G. S. 143B- 437.08 – Development Tier Designation: This section was amended by
adding a new subsection to designate an Eco- Industrial Park as development tier one.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 5.1, S. L.
10- 147.)
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SALES AND USE TAX
SALES AND USE TAX
G. S. 105- 164.3 – Definitions: The 2009 and 2010 General Assembly added and
revised multiple definitions. The changes and their effective dates are as follows:
Delivered electronically – ( 5d). This definition is repealed.
( Effective January 1, 2010; SB 202, s. 27A. 3.( d), S. L. 09- 451.)
Development tier – ( 6a). This definition is added as the classification assigned to an
area pursuant to G. S. 143B- 437.08.
( Effective July 1, 2010; SB 1215, s. 3.3, S. L. 10- 166.)
Eligible Internet datacenter – ( 8e). This definition is amended to indicate the facility is
used primarily or is to be used primary by a business engaged in software publishing
included in industry 511210 of NAICS or an Internet activity included in industry 519130
of NAICS will be considered an eligible Internet datacenter if all other conditions are
met.
( Effective July 1, 2010; SB 1171, s. 1, S. L. 10- 91.)
Load and leave – ( 17a). This definition is repealed.
( Effective January 1, 2010; SB 202, s. 27A. 3.( d), S. L. 09- 451.)
NAICS – ( 23a). This definition is amended to replace a statutory reference with The
North American Industry Classification System adopted by the United States Office of
Management and Budget as of December 31, 2007.
( Effective July 1, 2010; SB 1171, s. 2, S. L. 10- 91.)
G. S. 105- 164.4( a) – Increase in State Sales Tax Rate: The State general rate of tax
increased from 5.5% to 5.75% on October 1, 2009. This occurred simultaneously with
the repeal of the local sales tax under Article 44 as a result of the State’s assumption of
Medicaid responsibilities for the counties. Effective July 1, 2011, the State general rate
of tax is scheduled to decrease from 5.75% to 4.75%.
SECTION 4
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( Effective October 1, 2009 for sales occurring on or after that date the State general rate
is 4.75%; HB 1473, s. 31.16.4( g), S. L. 07- 323. Effective October 1, 2009 for sales
occurring on or after that date the State general rate is 5.75%; SB 202, s. 27A. 2.( b),
S. L. 09- 451. Effective July 1, 2011 for sales occurring on or after that date the State
general rate is 4.75%; SB 202, s. 27A. 2.( b), S. L. 09- 451.)
G. S. 105- 164.4( a)( 6b) – Tax on Digital Property: This new subdivision imposes the
State general and applicable local rate of tax on digital property that is listed below, is
delivered or accessed electronically, is not considered tangible personal property, and
would be taxable under Article 5 if sold in a tangible medium. The tax applies
regardless of whether the purchaser of the item has the right to use it permanently or to
use it without making continued payments. The tax does not apply to a service that is
taxed under G. S. 105- 164.4( a) or to an information service. The following property is
subject to tax under this subdivision: ( a) an audio work, ( b) an audiovisual work, ( c) a
book, a magazine, a newsletter, a report, or another publication, ( d) a photograph or a
greeting card.
( Effective January 1, 2010; SB 202, s. 27A. 3.( e), S. L. 09- 451.)
G. S. 105- 164.4( a)( 1j) – Tax on Electricity Sold to Manufacturers and Farmers: This
subdivision is repealed effective July 1, 2010.
( Effective October 1, 2007 for sales occurring on or after that date; SB 3, s. 10( c), S. L.
07- 397. The rate is reduced from 1.8% to 1.4%; effective July 1, 2008 for sales
occurring on or after that date; SB 3, s. 10( d), S. L. 07- 397. The rate is further reduced
from 1.4% to 0.8%; effective July 1, 2009 for sales occurring on or after that date; SB 3,
s. 10( e), S. L. 07- 397. The subdivision is repealed and sales of electricity sold to a
manufacturer for use in connection with the operation of a manufacturing facility and
sales of electricity are sold to a farmer to be used for any farming purpose other than
preparing food, heating dwellings, and other household purpose are exempt from tax;
effective July 1, 2010 for sales occurring on or after that date; SB 3, s. 10( f), S. L. 07-
397.)
G. S. 105- 164.4( a)( 3) – Accommodations: This subdivision is amended to modernize
sales tax on accommodations “ A tax at the general rate applies to the gross receipts
derived from the rental of an accommodation. The tax does not apply to a private
residence or cottage that is rented for fewer than 15 days in a calendar year or to an
accommodation rented to the same person for a period of 90 or more continuous days.
Gross receipts derived from the rental of an accommodation include the sales price of
the rental of the accommodation. The sales price of the rental of an accommodation is
determined as if the rental were a rental of tangible personal property. The sales price
of the rental of an accommodation marketed by a facilitator includes charges designated
as facilitation fees and any other charges necessary to complete the rental. A person
who provides an accommodation that is offered for rent is considered a retailer under
this Article. A facilitator must report to the retailer with whom it has a contract the sales
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price a consumer pays to the facilitator for an accommodation rental marketed by the
facilitator. A retailer must notify a facilitator when an accommodation rental marketed by
the facilitator is completed and, within three business days of receiving the notice, the
facilitator must send the retailer the portion of the sales price the facilitator owes the
retailer and the tax due on the sales price. A facilitator that does not send the retailer
the tax due on the sales price is liable for the amount of tax the facilitator fails to send. A
facilitator is not liable for tax sent to a retailer but not remitted by the retailer to the
Secretary. Tax payments received by a retailer from a facilitator are held in trust by the
retailer for remittance to the Secretary. A retailer that receives a tax payment from a
facilitator must remit the amount received to the Secretary. A retailer is not liable for tax
due but not received from a facilitator. The requirements imposed by this subdivision on
a retailer and a facilitator are considered terms of the contract between the retailer and
the facilitator. A person who, by written contract, agrees to be the rental agent for the
provider of an accommodation is considered a retailer under this Article and is liable for
the tax imposed by this subdivision. The liability of a rental agent for the tax imposed by
this subdivision relieves the provider of the accommodation from liability. A rental agent
includes a real estate broker, as defined in G. S. 93A- 2. The following definitions apply
in this subdivision: a. Accommodation. – A hotel room, a motel room, a residence, a
cottage, or a similar lodging facility for occupancy by an individual. b. Facilitator. – A
person who is not a rental agent and who contracts with a provider of an
accommodation to market the accommodation and to accept payment from the
consumer for the accommodation.”
( Effective January 1, 2011 and applies to gross receipts derived from the rental of an
accommodation on or after that date; SB 897, s. 31.6.( a), S. L. 10- 31. Makes a technical
change to replace “ act” with the word “ section”; SB 1202, s. 10.2., S. L. 10- 123.)
G. S. 105- 164.4B( e) – Sourcing Principles – Accommodations: This is a new
subsection to source the rental of an accommodation, as defined in G. S. 105-
164.4( a)( 3) to the location of the accommodation.
( Effective January 1, 2011 and applies to gross receipts derived from the rental of an
accommodation on or after that date; SB 897, s. 31.6.( b), S. L. 10- 31.)
G. S. 105- 164.13 – Exemptions and Exclusions: The 2009 and 2010 General
Assembly added and amended exemptions. Also included are exemptions enacted by
the 2007 General Assembly with future effective dates. The changes and their effective
dates are as follows:
Fuel sold to farmers – ( 1). This exemption for sales of specific items to a farmer for
use by the farmer in the planting, cultivating, harvesting, or curing of farm crops or in the
production of dairy products, eggs, or animals was rewritten to remove the reference to
“ electricity” in the phrase “ fuel other than electricity.” The sales tax on electricity will be
phased out.
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( Effective July 1, 2010 for sales occurring on or after that date; SB 3, s. 10( g), S. L. 07-
397.)
Electricity sold to farmers – ( 1b). This is a new exemption for electricity sold to a
farmer to be used for any farming purpose other than preparing food, heating dwellings,
and other household purposes.
( Effective July 1, 2010 for sales occurring on or after that date; SB 3, s. 10( h), S. L. 07-
397.)
Sales of wood chippers – ( 4g). This is a new exemption for sales of wood chippers
that meet all of the following requirements: a. It is designed to be towed by a motor
vehicle. b. It is assigned a 17- digit vehicle identification number by the National Highway
Transportation Safety Association. c. It is sold to a person who purchases a motor
vehicle in this State that is to be registered in another state and who uses the
purchased motor vehicle to tow the wood chipper to the state in which the purchased
motor vehicle is to be registered.
( Effective July 1, 2009 and applies to sales made on or after that date; HB 1973, s. 6.1,
S. L. 10- 147.)
Sales to a telephone company – ( 5b). This exemption is amended to modernize
language. The word “ telephone” was changed to “ telecommunications”. There is no
change in the application of the exemption.
( Effective January 1, 2010 for sales occurring on or after that date; SB 202, s. 27A. 3.( f),
S. L. 09- 451.)
Sales of magazines – ( 28). This exemption is rewritten to delete sales of magazines
by magazine vendors making door to door sales. Therefore magazine subscriptions are
subject to sales and use tax.
( Effective January 1, 2010 for sales occurring on or after that date; SB 202, s. 27A. 3.( f),
S. L. 09- 451.)
Sales of computer software – ( 43a). This exemption is rewritten to delete computer
software delivered electronically or by load and leave. However, computer software
meeting any one of the following descriptions will be exempt: ( a) It is designed to run on
an enterprise server operating system. ( b) It is sold to a person who operates a
datacenter and is used within the datacenter. ( c) It is sold to a person who provides
cable service, telecommunications service, or video programming and is used to
provide ancillary service, cable service, Internet access service, telecommunications
service, or video programming.
( Effective January 1, 2010 for sales occurring on or after that date; SB 202, s. 27A. 3.( f),
S. L. 09- 451.)
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Sales of computer software or digital property that becomes a component part –
( 43b). This is a new exemption for computer software or digital property that becomes
a component part of other computer software or digital property that is offered for sale
or of a service that is offered for sale.
( Effective January 1, 2010 for sales occurring on or after that date; SB 202, s. 27A. 3.( f),
S. L. 09- 451.)
Sales of electricity and eligible business property for use at an eligible Internet
datacenter – ( 55). This exemption amends subdivision “ a.” to add the stipulation that
eligible business property is property that is capitalized for tax purposes under the code
and is used for the provision of a service included in the business of the primary use of
the datacenter. There was also a grammatical change with the word “ datacenter”
throughout this exemption.
( Effective July 1, 2010; SB 1171, s. 3, S. L. 10- 91.)
Fuel and electricity sold to manufacturers – ( 57). This is a new exemption for fuel
and electricity sold to a manufacturer for use in connection with the operation of a
manufacturing facility.
( Effective July 1, 2010 for sales occurring on or after that date; SB 3, s. 10( h), S. L. 07-
397.)
G. S. 105- 164.14( a1) – Passenger Plane Maximum: Pursuant to S. L. 10- 31 this
subsection is amended to extend the repeal date from January 1, 2011 to January 1,
2013. Pursuant to S. L. 10- 166 this subsection is repealed. The refund provision is
incorporated in G. S. 105- 164.14A as Passenger Air Carrier.
( Effective July 1, 2010; SB 897, s. 31.5.( c), S. L. 10- 31; Effective July 1, 2010; SB 1215,
s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( c) – Certain Governmental Entities: A joint agency created by an
interlocal agreement pursuant to G. S. 160A- 462 to operate a cable system that provides
video programming services is allowed a refund of sales and use tax paid by it on
purchases made on or after July 1, 2007, and before June 30, 2010, to the same extent
allowed to a city under G. S. 105- 164.14( c). Notwithstanding G. S. 105- 164.14, the joint
agency must make a request for a refund in writing before January 1, 2011.
( Effective July 22, 2010; HB 455, s. 1, S. L. 10- 153.)
G. S. 105- 164.14( c)( 23) – Certain Governmental Entities: This new subsection allows
a public library created pursuant to an act of the General Assembly to receive an annual
refund of sales and use tax.
26
( Effective July 1, 2008 and applies to purchases made on or after that date; SB 1177, s.
4.( a), S. L. 10- 95.)
G. S. 105- 164.14( f) – Information to Counties and Cities: This subsection is
repealed, but is added back in G. S. 105- 164.29B.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( g) – Major Recycling Facilities: This subsection is repealed, but is
added back in G. S. 105- 164.14A as Major Recycling Facility.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( h) – Low Enterprise or Development Tier Machinery: This
subsection is repealed, but is added back in G. S. 105- 164.14A as Business Low- Tier
Area.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( j) – Certain Industrial Facilities: This subsection is repealed, but is
added back in G. S. 105- 164.14B as Certain Industrial Facilities Refunds.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( j)( 3) – Certain Industrial Facilities: This subdivision is amended to
add two new sub- subdivisions that are eligible for refund: paper- from- pulp
manufacturing and turbine manufacturing. Paper- from- pulp manufacturing means an
industry primarily engaged in manufacturing or converting paper, other than newsprint
or uncoated groundwood paper, from pulp or pulp products, or in converting purchased
sanitary paper stock or wadding into sanitary paper products. Turbine manufacturing
means an industry primarily engaged in manufacturing turbines or complete turbine
generator set units, such as steam, hydraulic, gas, and wind. Turbine manufacturing
under this provision does not include the manufacturing of aircraft turbines.
( Effective July 1, 2010; SB 1171, s. 4, S. L. 10- 91.)
G. S. 105- 164.14( k) – Reports: This subsection is repealed, but is added back in G. S.
105- 164.14A and G. S. 105- 164.14B.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( l) – Aviation Fuel for Motorsports Events: Pursuant to S. L. 10- 31
this subsection is amended to extend the repeal date from January 1, 2011 to January
1, 2013. Pursuant to S. L. 10- 166 this subsection is repealed. This refund provision is
incorporated in G. S. 105- 164.14A as Motorsports Team or Sanctioning Body.
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( Effective July 1, 2010; SB 897, s. 31.5.( d), S. L. 10- 31; Effective July 1, 2010; SB 1215,
s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( m) – Professional Motor Racing Vehicles: This subsection is
repealed, but is added back in G. S. 105- 164.14A as Professional Motorsports Team.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( n) – Analytical Services Supplies: This subsection is repealed, but
is added back in G. S. 105- 164.14A as Analytical Services Business.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( o) – Eligible Railroad Intermodal Facilities: This subsection is
repealed, but is added back in G. S. 105- 164.14A as Railroad Intermodal Facility.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14A – Economic Incentive Refunds: This section was added to
combine all of the economic incentive refunds into a more concise organization. The
due date of all of the refunds in this section is standardized to be due six months after
the end of the fiscal year and refunds applied for or after due date are barred. No
substantive requirement change for Passenger Air Carrier from G. S. 105- 164.14( a1)
except for due date. No substantive requirement change for Major Recycling Facility
from G. S. 105- 164.14( g) except for the due date. Business in Low- Tier Area is
amended from G. S. 105- 164.14( h) to only allow refunds of businesses listed in G. S.
105- 129.83( a) in a development tier one area. No substantive requirement change for
Motorsports Team or Sanctioning Body from G. S. 105- 164.14( l). Professional
Motorsports Team is amended from G. S. 105- 164.14( m) to add a repeal date of
January 1, 2014. Analytical Services Business is amended from G. S. 105- 164.14( n) to
add a repeal date of January 1, 2013. Railroad Intermodal Facility is amended from
G. S. 105- 164.14( o) to add a repeal date of January 1, 2038. The first claim for refund
for a taxpayer whose sales tax refund period is changed by this act is due within six
months after June 30, 2010, and applies to purchases during the time period not
covered by the taxpayer’s last claim for a refund.
( Effective July 1, 2010; SB 1215, s. 1.18., S. L. 10- 166.)
G. S. 105- 164.14B – Certain Industrial Facilities Refunds: This section was added to
combine all of the industrial facility refunds into a more concise organization. No
substantive changes for Air Courier Services, Aircraft Manufacturing, Bioprocessing,
Financial services, securities operations, and related systems development, Motor
Vehicle Manufacturing, Pharmaceutical and medicine manufacturing and distribution of
pharmaceuticals and medicines, Semiconductor manufacturing, and Solar electricity
generating material manufacturing from G. S. 105- 164.14( j). Computer Manufacturing is
28
deleted from this section as compared to G. S. 105- 164.14( j) that was repealed effective
July 1, 2010.
( Effective July 1, 2010; SB 1215, s. 1.19., S. L. 10- 166.)
G. S. 105- 164.15 – Secretary Shall Provide Forms: This section is repealed. G. S.
105- 254 continues to set out the Department’s responsibilities to furnish forms.
( Effective July 17, 2010; SB 1177, s. 13, S. L. 10- 95.)
G. S. 105- 164.16( b1) – Returns and Payment of Taxes- Monthly: This subsection is
amended by changing the upper threshold for a monthly filer and payer from less than
$ 10,000 to less than $ 15,000.
( Effective October 1, 2010; SB 897, s. 31.3.( a), S. L. 10- 31. Effective October 1, 2011,
the upper threshold increases to $ 20,000; SB 897, s. 31.3.( c), S. L. 10- 31. The
Department is required to notify taxpayers who are no longer required to make a
monthly prepayment of the next month’s sales and use tax liability after conducting a
review; SB 897, s 31.3.( e), S. L. 10- 31.)
G. S. 105- 164.16( b2) – Returns and Payment of Taxes- Prepayment: This
subsection is amended by changing the lower threshold for monthly with prepayment
filer and payer from at least $ 10,000 to at least $ 15,000.
( Effective October 1, 2010; SB 897, s. 31.3.( b), S. L. 10- 31. Effective October 1, 2011,
the lower threshold increases to at least $ 20,000; SB 897, s. 31.3.( d), S. L. 10- 31. The
Department is required to notify taxpayers who are no longer required to make a
monthly prepayment of the next month’s sales and use tax liability after conducting a
review; SB 897, s 31.3.( e), S. L. 10- 31.)
G. S. 105- 164.16( d) – Use Tax on Out of State Purchases: The subsection that is
effective for taxable years beginning on or after January 1, 2010 is repealed. The effect
is that use tax due by individuals will continue to be reported on the North Carolina
Individual Income Tax Return.
( Effective August 7, 2009; SB 202, s. 27A. 3.( b), S. L. 09- 451.)
G. S. 105- 164.29B - Information to Counties and Cities: This subsection was added
and requires that “ The Secretary must give information on refunds of tax made under
this Article to a designated county or city official within 30 days after the official makes a
written request to the Secretary for the information. For a request made by a county
official, the Secretary must give the official a list of each claimant that received a refund
in the past 12 months of at least one thousand dollars ($ 1,000) of tax paid to the county.
For a request made by a city official, the Secretary must give the official a list of each
claimant that received a refund in the past 12 months of at least one thousand dollars
($ 1,000) of tax paid to all the counties in which the city is located. The list must include
29
the name and address of each of these claimants and the amount of the refund
received from each county covered by the request. A claimant that has received a
refund under this Article of tax paid to a county must give information on the refund to a
designated official of the county or a city located in the county. The claimant must give
the information to the county or city official within 30 days after the official makes a
written request to the claimant for the information. For a request by a county or city
official, the claimant must give the official a copy of the request for the refund and any
supporting documentation requested by the official to verify the request. If a claimant
determines that a refund it has received under this Article is incorrect, the claimant must
file an amended request for a refund. For purposes of this section, a designated county
official is the chair of the board of county commissioners or a county official designated
in a resolution adopted by the Board, and a designated city official is the mayor of the
city or a city official designated in a resolution adopted by the city's governing board.
Information given to a county or city official under this section is not a public record and
may not be disclosed except as provided in G. S. 153A- 148.1 or G. S. 160A- 208.1."
( Effective July 1, 2010; SB 1215, s. 1.20, S. L. 10- 166.)
G. S. 105- 164.44F – Distribution of part of telecommunications taxes to cities: This
section is rewritten to reduce the distributable percentage amounts on
telecommunications service and ancillary service to cities and counties. This is to hold
the State harmless as a result of the temporary one percent ( 1%) increase of the
“ combined general rate” for telecommunications service and ancillary service.
( Effective October 1, 2009 for distributions for months beginning on or after that date;
SB 202, s. 27A. 2.( c), S. L. 09- 451. Effective July 1, 2011, the reduced distributable
percentage amounts are repealed; SB 202, s. 27A. 2.( c), S. L. 09- 451.)
G. S. 105- 164.44I – Distribution of part of sales tax on video programming and
telecommunications: This section is rewritten to reduce the distributable percentage
amounts on telecommunications service and video programming service to cities and
counties. This is to hold the State harmless as a result of the temporary one percent
( 1%) increase of the “ combined general rate” for telecommunications service and video
programming service.
( Effective October 1, 2009 for distributions for months beginning on or after that date;
SB 202, s. 27A. 2.( d), S. L. 09- 451. Effective July 1, 2011, the reduced distributable
percentage amounts are repealed; SB 202, s. 27A. 2.( d), S. L. 09- 451.)
G. S. 105- 164.44I( b) – Distribution of part of sales tax on video programming
service and telecommunications service to counties and cities: This subsection
was amended and specifies that the amount of supplemental PEG channel support that
the Secretary must include in each quarterly distribution to a city or county is “ one-fourth
of the share of each qualifying PEG channel certified by the city or county under
G. S. 105- 164.44J. The share of each certified PEG channel is the sum of four million
dollars ($ 4,000,000) and the amount of any funds returned to the Secretary in the prior
30
fiscal year under G. S. 105- 164.44J( d) divided by the number of PEG channels certified
under G. S. 105- 164.44J.”
( Effective July 1, 2011; HB 1691, s. 11.( b), S. L. 10- 158.) Applies to distributions made
on or after July 1, 2011, for quarters starting on or after April 1, 2011.
G. S. 105- 164.44J( b) – Supplemental PEG channel support: This subsection was
amended to indicate that “ A county or city may not certify more than three qualifying
PEG channels.”
( Effective July 1, 2010; HB 1691, s. 11.( c), S. L. 10- 158.)
LOCAL SALES AND USE TAX
G. S. 105- 466( c) – Levy of Tax: This subdivision is amended to require the collection of
a new levy to begin on the first day of a calendar quarter instead of the first day of the
month of either January or July. The requirement for the county to give the Secretary at
least 90 days advance notice of a new levy or tax rate change was suspended for the
2010 calendar year. For the 2010 calendar year only, the county must give the
Secretary at least 75 days advance notice of a new levy or tax rate.
( Effective July 17, 2010; SB 1177, s 12, S. L. 10- 95. Effective July 17, 2010; SB 1177, s
44, S. L. 10- 95.)
G. S. 105- 467( b) – Exemptions and Refunds: This subdivision is amended to reflect
the addition of G. S. 105- 164.14A and G. S. 105- 164.14B.
( Effective July 1, 2010; SB 1215, s 3.8, S. L. 10- 166.)
G. S. 105- 487 – Use of Additional Tax Revenue by Counties: This subsection
amends the length of time requiring a county to reserve thirty percent ( 30%) of revenue
received from this Article for the public school capital outlay fund in each county. The
sunset provision is deleted, ensuring the public outlay fund will continue to be funded at
its current level in perpetuity.
( Effective January 1, 2010 for sales made on or after that date; HB 311, s 1, S. L. 09-
395.)
G. S. 105- 502 – ( Effective October 1, 2009) Use of Additional Tax Revenue by
Counties: This subsection amends the length of time requiring a county to reserve
sixty percent ( 60%) of revenue received specified calculation from this Article for the
public school capital outlay fund in each county. The sunset provision is deleted,
ensuring the public outlay fund will continue to be funded at its current level in
perpetuity.
31
( Effective January 1, 2010 for sales made on or after that date; HB 311, s. 2, S. L. 09-
395.)
G. S. 105- 522 – City Hold Harmless for Repealed Local Taxes: This is a new section
providing a municipality that was incorporated on or before October 1, 2008 and
receives a sales and use tax distribution under G. S. 105- 472 receives a hold harmless
amount. The hold harmless amount is 50% of the amount of sales and use tax revenue
distributed for a month to the municipality under Article 40 other than revenue from
sales of qualifying food subject to only the 2% local tax. A county must hold the
municipalities harmless from the repeal of the taxes formerly imposed under Article; the
municipality’s hold harmless amount is to be added to the municipality’s monthly
distribution. The revenue for the hold harmless distribution is obtained by reducing
each county’s monthly allocation under G. S. 105- 472( b) or under the corresponding
provision in the Mecklenburg first one- cent sales tax act by the hold harmless amounts
for the municipalities in that county.
( Effective October 1, 2008 for distributions for months beginning on or after that date;
HB 1473, s. 31.16.3( f), S. L. 07- 323. The calculation of the repealed sales tax amount is
changed for fiscal year 2008- 2009; effective October 1, 2008 for distributions for months
beginning on or after that date; HB 1473, s. 31.16.3( g), S. L. 07- 323. Repealed ( Effective
July 28, 2008; SB 1704, s. 15( b), S. L. 08- 134.) The calculation of the hold harmless
amount is amended; effective October 1, 2009 for distributions for months beginning on
or after that date; HB 1473, s. 31.16.4( c), S. L. 07- 323. Repealed ( Effective July 28,
2008; SB 1704, s. 15( c), S. L. 08- 134.) For the 2009- 2010 fiscal year, further changes
are made in the method of calculating the repealed sales tax amount; effective October
1, 2009; HB 1473, s. 31.16.4( e), S. L. 07- 323. Repealed ( Effective July 28, 2008; SB
1704, s. 15( e), S. L. 08- 134.) Further revisions are made in the method of calculating
the hold harmless amount; effective October 1, 2009 for distributions for months
beginning on or after that date; HB 714, s. 14.4( a), S. L. 07- 345.) Repealed ( Effective
July 28, 2008; SB 1704, s. 15( f), S. L. 08- 134.)
G. S. 105- 523 – County Hold Harmless for Repealed Local Taxes: This is a new
section requiring the Secretary to make hold harmless payments to a county if the
“ repealed sales tax amount” for a fiscal year exceeds the county’s “ hold harmless
threshold.” These terms are defined in this section. To determine if the county is
eligible for a hold harmless payment, the Secretary must estimate a county’s repealed
sales tax amount and hold harmless threshold for a fiscal year and must send an
eligible county 90% of its estimated hold harmless payment with the monthly distribution
made under G. S. 105- 472 for March of that year. At the end of each fiscal year, the
Secretary is required to determine the difference between a county’s repealed sales tax
amount and its hold harmless threshold for that year and send the remainder of the
county’s hold harmless payment for the fiscal year ended June 30 by August 15. The
intent of this section is that each county benefit by at least $ 500,000 annually from the
exchange of a portion of the local sales and use taxes for the State’s assumption of
responsibility for the non- administrative costs of Medicaid.
32
( Effective October 1, 2008 for distributions for months beginning on or after that date;
HB 1473, s. 31.16.3( f), S. L. 07- 323. The calculation of the repealed sales tax amount is
changed for fiscal year 2008- 2009; effective October 1, 2008 for distributions for months
beginning on or after that date; HB 1473, s. 31.16.3( g), S. L. 07- 323. Repealed ( Effective
July 28, 2008; SB 1704, s. 15( b), S. L. 08- 134.) The calculation of the hold harmless
amount is amended; effective October 1, 2009 for distributions for months beginning on
or after that date; HB 1473, s. 31.16.4( d), S. L. 07- 323. Repealed ( Effective July 28,
2008; SB 1704, s. 15( d), S. L. 08- 134.) For the 2009- 2010 fiscal year, further changes
are made in the method of calculating the repealed sales tax amount; effective October
1, 2009; HB 1473, s. 31.16.4( e), S. L. 07- 323. Repealed ( Effective July 28, 2008; SB
1704, s. 15( e), S. L. 08- 134.) Further revisions are made in the method of calculating
the repealed sales tax amount; effective October 1, 2009 for distributions for months
beginning on or after that date; HB 714, s. 14.4( b), S. L. 07- 345.) Repealed ( Effective
July 28, 2008; SB 1704, s. 15( f), S. L. 08- 134.) Further amendments to provide a due
date for county hold harmless estimate and final calculation ( Effective July 17, 2010; SB
1177, s. 14, S. L 10- 95.)
G. S. 105- 523( b)( 2) – County Hold Harmless for Repealed Local Taxes: This amends
the definition of “ Hold Harmless Threshold” to ensure that a county’s Medicaid service
costs for the fiscal years 2008- 2009, 2009- 2010, and 2010- 2011 are determined without
regard to the changes made to the Federal Medical Assistance Percentage by section
5001 of the American Recovery and Reinvestment Act of 2009.
( Effective July 31, 2009 and applies to distributions for months beginning on or after
October 1, 2008; HB 102, s. 4.( a), S. L. 09- 399.)
HIGHWAY USE TAX – ARTICLE 5A
G. S. 105- 187.3( b) – Retail Value: This definition is amended to combine “( b) Retail
Value” and “( b1) Retail Value of Transferred Department of Defense Vehicles.” There is
no substantive change.
( Effective July 17, 2010; SB 1177, s. 5, S. L. 10- 95.)
G. S. 105- 187.6( a) – Full Exemptions: This subsection is amended by adding a new
subdivision for a full exemption of Highway Use Tax as a result of a certificate of title
transfer to a revocable trust from an owner who is the sole beneficiary of the trust.
( Effective July 17, 2010; SB 1177, s. 6, S. L. 10- 95.)
SCRAP TIRE DISPOSAL TAX – ARTICLE 5B
G. S. 105- 187.18( b) – Exemptions: This subdivision is amended to reflect the addition
of G. S. 105- 164.14A and G. S. 105- 164.14B by referencing Article 5 of this Chapter.
33
( Effective July 1, 2010; SB 1215, s 3.4, S. L. 10- 166.)
G. S. 105- 187.19( b) – Use of Tax Proceeds: This subsection is temporarily amended
to credit taxes levied during the 2010- 2011 fiscal year to the General Fund the net tax
proceeds that G. S. 105- 187.19( b) directs the Secretary of Revenue to credit to the
Scrap Tire Disposal Account. This subsection was further amended to clarify that the
transfer applies to distributions made by the Secretary during the 2010- 2011 fiscal year.
( Effective July 1, 2010; SB 897, s. 2.2.( d), S. L. 10- 31. Effective July 1, 2010; SB 1202,
s. 1.2.( a), S. L. 10- 123.)
WHITE GOODS DISPOSAL TAX – ARTICLE 5C
G. S. 105- 187.23 – Exemptions and Refunds: This section is amended to reflect the
addition of G. S. 105- 164.14A and G. S. 105- 164.14B by referencing Article 5 of this
Chapter.
( Effective July 1, 2010; SB 1215, s 3.5, S. L. 10- 166.)
G. S. 105- 187.24 – Use of Tax Proceeds: This subsection is temporarily amended to
credit taxes levied during the 2010- 2011 fiscal year to the General Fund the net tax
proceeds that G. S. 105- 187.24 directs the Secretary of Revenue to credit to the White
Goods Management Account. This subsection was further amended to clarify that the
transfer applies to distributions made by the Secretary during the 2010- 2011 fiscal year.
( Effective July 1, 2010; SB 897, s. 2.2.( e), S. L. 10- 31. Effective July 1, 2010; SB 1202,
s. 1.2.( b), S. L. 10- 123.)
DRY- CLEANING SOLVENT TAX – ARTICLE 5D
G. S. 105- 187.33 – Exemptions and Refunds: This section is amended to reflect the
addition of G. S. 105- 164.14A and G. S. 105- 164.14B by referencing Article 5 of this
Chapter.
( Effective July 1, 2010; SB 1215, s 3.6, S. L. 10- 166.)
MANUFACTURING FUEL AND CERTAIN MACHINERY AND
EQUIPMENT – ARTICLE 5F
G. S. 105- 187.50 – Definitions: This section is amended to delete the definition for
eligible datacenter.
34
( Effective July 1, 2010; SB 1171, s. 5, S. L. 10- 91.)
G. S. 105- 187.51a.( 1) – Tax Imposed on Mill Machinery: This subsection is amended
to exclude a production company from qualifying for the 1% privilege tax levied on the
purchase of mill machinery or mill machinery parts or accessories. Purchases by
motion picture and film production companies will be subject to the general state and
local tax rates.
( Effective January 1, 2011; HB 1973, s. 2.3, S. L. 10- 147.)
G. S. 105- 187.51A – Privilege Tax on Manufacturing Fuel: This section is rewritten to
reflect a reduction in the privilege tax rate imposed on a manufacturing industry or plant
that purchases fuel to operate the industry or plant. The section is repealed and
purchases of fuel for use in connection with the operation of a manufacturing facility are
exempt from tax effective July 1, 2010.
( Effective October 1, 2007 for fuel purchased on or after that date; SB 3, s. 12( a), S. L.
07- 397. The rate is reduced from 0.7% to 0.5%; effective July 1, 2008 for fuel
purchased on or after that date; SB 3, s. 12( b), S. L. 07- 397. The rate is further reduced
from 0.5% to 0.3%; effective July 1, 2009 for fuel purchased on or after that date; SB 3,
s. 12( c), S. L. 07- 397. The section is repealed; SB 3, s. 12( d), S. L. 07- 397.)
G. S. 105- 187.51C – Tax Imposed on Datacenter Machinery and Equipment: This
section is amended to add subsection ( a1) Requirements that the Secretary of
Commerce must certify before the datacenter is eligible. As a result subsection ( a) is
amended to delete the reference to eligible datacenter as defined in G. S. 105- 164.3( 8e)
and adds reference to subsection ( a1). Subsection ( a2) is added to reference a second
datacenter and sets out the requirements for qualifying for the 1% privilege tax.
Subsection ( a3) is added to reference contractors and subcontractors of the datacenters
as being eligible to purchase machinery and equipment at the 1% privilege tax.
Subsection ( b) Rate and Scope is amended to state that the tax does not apply to
equipment and machinery of an eligible Internet datacenter that is exempt from sales
tax under G. S. 105- 164.13( 55). Subsection ( d) is amended to extend the sunset of this
section to July 1, 2015.
( Effective July 1, 2010; SB 1171, s. 7, S. L. 10- 91.)
G. S. 105- 187.51C( a)( 1) – Tax Imposed on Datacenter Machinery and Equipment:
This subdivision is amended to delete “ and software” from the items considered to be
machinery and equipment in the datacenter. Software is exempt under G. S. 105-
164.13( 43a) b. when sold to a person who operates a datacenter and the software is
used in the datacenter.
( Effective July 1, 2010; SB 1171, s. 6, S. L. 10- 91.)
35
PROPERTY TAX
PROPERTY TAX
G. S. 105- 275( 29a) — Historic Property: Technical change which clarifies that all liens
arising under this subdivision are extinguished upon the location of an historic structure
on the site within the time period allowed under this subdivision.
( Effective July 17, 2010; SB 1177, s. 15, S. L. 2010- 95.)
G. S. 105- 277.1C( b)( 1) — Disabled Veteran Property Tax Homestead Exclusion:
Adds a new section which allows a residence owned by a deceased veteran to qualify
for the disabled veteran property tax exclusion, if the United States Department of
Veterans Affairs or another federal agency has certified that, as of January 1, preceding
the taxable year for which the exclusion allowed by this section is claimed, the veteran’s
death was the result of a service- connected condition. Defines service connected as
defined in 38 U. S. C. § 101.
( Effective July 17, 2010; SB 1177, s. 16, S. L. 2010- 95.)
G. S. 277.1D — Inventory Property Tax Deferral: Allows the taxes on a residence
constructed by a builder and owned by the builder or a business entity of which the
builder is a member, as defined in G. S. 105- 277.2 to be deferred until a disqualifying
event occurs.
( Effective for taxes imposed for taxable years beginning on or after July 1, 2010; HB
1249, s. 1, S. L. 2010- 140.)
G. S. 105- 278( b) — Historic Property: Technical change which clarifies that no
deferred taxes are due and all liens arising under this subdivision are extinguished
when the property’s historical significance is lost or substantially impaired due to fire or
other natural disaster.
( Effective July 17, 2010; SB 1177, s. 17, S. L. 2010- 95.)
G. S. 105- 278.6( e) — Low or Moderate Income Housing: Technical change which
clarifies that all liens arising under this subdivision are extinguished when the property is
used for low or moderate income housing within the time period allowed under this
subdivision.
( Effective July 17, 2010; SB 1177, s. 18, S. L. 2010- 95.)
SECTION 5
36
G. S. 105- 330.9 and G. S. 105- 330.11 — Motor Vehicles: Amends the effective date of
the combined property tax and vehicle registration system provided for by House Bill
1779.
( Effective July 17, 2010; SB 1177, s. 21 and 22, S. L. 2010- 95.)
G. S. 105- 333( 14) — Public Service Company: Amends the definition of public service
company by removing the reference to radio common carrier company as defined in
G. S. 62- 119( 3).
( Effective July 17, 2010; SB 1177, s. 19, S. L. 2010- 95.)
G. S. 105- 333( 21) — Motor Freight Carrier Terminal: Adds the following definition for
a terminal: A motor freight carrier facility that includes buildings for the handling and
temporary storage of freight pending transfer between locations. The term also includes
a facility that handles truckloads only and typically consists of a wide, open space where
rolling stock is parked and a building for offices and maintenance of rolling stock.
( Effective July 17, 2010; SB 1177, s. 20, S. L. 2010- 95.)
G. S. 105- 501( b) — Reimbursement to the State for Local Government Services:
Changes the method by which the State is reimbursed for costs incurred by the
Department of Revenue for performing duties imposed by Article 15 and the costs
incurred by the North Carolina Property Tax Commission.
( Effective July 1, 2010; SB 897, s. 26.1( a), S. L. 2010- 31.)
G. S. 105A- 2 and G. S. 105A- 3( c) — Debt Set- Off: Changes the definition of a Debtor
from an “ individual” to “ a person who owes a debt.” Adds the requirement that
whenever possible, all claimant agencies shall obtain and provide to the Department of
Revenue the full name, social security number or federal identification number, address,
and any other identifying information required by the Department of Revenue.
( Effective July 1, 2010; SB 897, s. 31.8( d), 31.8( e), and 31.8( f), S. L. 2010- 31.)
G. S. 153A- 340, G. S. 153A- 357( c)( 2) and G. S. 105- 360 — Currituck County and
Pasquotank County: Provides that Currituck County may prohibit the issuance of a
land- use permit or a building permit to a delinquent taxpayer and allows Pasquotank
County to set the tax prepayment discount by June 30, 2010.
( Effective June 30, 2010; HB 1953, s. 2, 3, and 4, S. L. 2010- 30.)
37
G. S. 161- 31( b) — Payment of Delinquent Property Taxes: Adds Dare and McDowell
counties to the list of counties authorized to require the payment of delinquent property
taxes before recording deeds conveying property.
( Effective July 1, 2010; HB 1754, s. 1, S. L. 2010- 44.)
G. S. 161- 31 — Payment of Delinquent Property Taxes: Provides that the Duplin
County Board of Commissioners may by resolution require the register of deeds not to
accept any deed transferring real property for registration unless the county tax collector
has certified that no county or municipal ad valorem taxes are a lien on the property or
that no other taxes which have been charged to the collector are a lien on the property.
This act only applies to Duplin County.
( Effective June 28, 2010; HB 1673, s. 1, S. L. 2010- 24.)
G. S. 153A- 18( c) — Orange County and Alamance County Boundary: Enables the
transition of properties of the area along the common boundary between Alamance
County and Orange County due to the 2008 North Carolina Geodetic Survey.
( Effective July 1, 2010; SB 1362, s. 1, S. L. 2010- 61.)
38
MOTOR FUELS
MOTOR FUELS
G. S. 105- 241( b)( 2a) – Reporting and Payment Requirement: This statute was
amended to require all taxpayers who file returns electronically to also pay any liability
from those filed returns electronically.
( Effective July 17, 2010; SB 1177, s. 25, S. L. 10- 95.)
G. S. 105- 449.37( a)( 1) – Update Reference to the IFTA Agreement: This statute was
amended update the reference to the International Fuel Tax Agreement.
( Effective July 17, 2010; SB 1177, s. 27, S. L. 10- 95.)
G. S. 105- 449.39 – Technical: This statute was amended to make the reference to tax
returns uniform.
( Effective July 17, 2010; SB 1177, s. 26( a), S. L. 10- 95.)
G. S. 105- 449.40( a) – Technical: This statute was amended to make the reference to
tax returns uniform.
( Effective July 17, 2010; SB 1177, s. 26( b), S. L. 10- 95.)
G. S. 105- 449.42 – Technical: This statute was amended to make the reference to tax
returns uniform.
( Effective July 17, 2010; SB 1177, s. 26( c), S. L. 10- 95.)
G. S. 105- 449.42A – Technical: This statute was amended to make the reference to tax
returns uniform. This statute was further amended to reword subsection ( b) for clarity.
( Effective July 17, 2010; SB 1177, s. 26( d), S. L. 10- 95.)
G. S. 105- 449.44( b) – Technical: This statute was amended to make the reference to
tax returns uniform.
( Effective July 17, 2010; SB 1177, s. 26( e), S. L. 10- 95.)
G. S. 105- 449.45 – Technical: This statute was amended to make the reference to tax
returns uniform.
( Effective July 17, 2010; SB 1177, s. 26( f), S. L. 10- 95.)
SECTION 6
39
G. S. 105- 449.47A – Motor Carrier Registration Requirement: This statute was
amended to provide that motor carriers who wish to register with North Carolina as its
base state under the IFTA must be incorporated in this State or authorized to transact
business in this State.
( Effective July 17, 2010; SB 1177, s. 28, S. L. 10- 95.)
G. S. 105- 449.105A – Partial Repeal of Undyed Kerosene Refund by Distributors:
This statute was amended to repeal some of the purposes for which a distributor may
obtain a monthly refund of the motor fuel tax the distributor paid on undyed kerosene.
Specifically, a distributor may no longer sell untaxed, undyed kerosene to retailers with
blocked pumps for non- highway purposes. All undyed kerosene sold to a retailer for
resale must include the tax. The end- user ( person purchasing the fuel for use) would file
a Gas- 1201 Claim for Refund, Tax- paid Motor Fuel Used for Off- Highway.
( Effective January 1, 2011 and applies to sales of undyed kerosene made by a
distributor on or after that date; SB 1177, s. 29, S. L. 10- 95.)
G. S. 105- 449.105B – Technical: This statute was amended to remove a word created
by a redlining error.
( Effective July 17, 2010; SB 1177, s. 30, S. L. 10- 95.)
G. S. 105- 449.106( b) – Definition of Taxicab: This statute was amended to provide for
a definition of taxicab that was substantially the same as the one that existed in G. S. 20-
87( 1), prior to repeal.
( Effective July 17, 2010; SB 1177, s. 31( a), S. L. 10- 95.)
G. S. 105- 449.106( c) – Clarification of Refund Eligibility for Special Mobile
Equipment: This statute was amended to clarify that the quarterly refund of motor fuel
tax paid on fuel used to operate special mobile equipment is for the non- highway use of
equipment that is registered as SME under Chapter 20.
( Effective October 1, 2010 and applies to motor fuel purchased on or after this date; SB
1177, s. 31( b), S. L. 10- 95.)
G. S. 105- 449.108( b) – Technical: This statute was amended to require that the
applications for refunds must be filed in the form as required by the Secretary.
( Effective July 17, 2010; SB 1177, s. 32, S. L. 10- 95.)
40
GENERAL ADMINISTRATION
GENERAL ADMINISTRATION
G. S. 105- 228.90( b)( 1b) – Reference to the Internal Revenue Code Updated:
The calculation of North Carolina taxable income begins with federal taxable income as
defined under the Internal Revenue Code (“ Code”). State law defines the Code as the
Code enacted as of a certain date. When our State law’s reference date to the Code is
updated each year, that change conforms North Carolina law to federal law that has
been enacted as of that date, except for any items for which specific adjustments are
required by State law.
This subdivision was amended to update the reference to the Internal Revenue Code
from May 1, 2009 to May 1, 2010.
( Effective June 30, 2010; SB 897, s. 31.1.( a); S. L. 10- 31.)
This means that State law has adopted all provisions of the following federal acts
( except for certain NOL provisions) enacted since May 1, 2009:
􀁸 Worker, Homeownership, and Business Assistance Act ( signed by the President
on November 6, 2009; P. L. 111- 92)
􀁸 Haiti Assistance Income Tax Incentive Act ( signed by the President on January
22, 2010; P. L. 111- 126)
􀁸 Hiring Incentives to Restore Employment Act [ HIRE] ( signed by the President on
March 18, 2010: P. L. 111- 147)
􀁸 “ Patient Protection and Affordable Care Act” as amended by “ Health Care and
Education Reconciliation Act of 2010” ( signed by the President on March 23,
2010 and March 30, 2010, respectively; P. L. 111- 148 and P. L. 111- 152)
G. S. 105- 236( a)( 4) – Failure to Pay Penalty: This subsection was amended and a new
subdivision added to set out when the failure to pay penalty may not be imposed. When
the Secretary proposes an assessment for tax due but not shown on the return, the
SECTION 7
41
penalty may not be imposed if the taxpayer does not file a request for review but pays
the tax within 45 days after the date of the notice.
If the taxpayer files a timely request for review, the failure to pay penalty may not be
imposed if the tax is paid within 45 days of any of the following events: 􀁸 The date the taxpayer and the Department reach a settlement concerning the
amount of tax due, 􀁸 60 days after the date of a final determination and the taxpayer does not timely
petition the Office of Administrative Hearings for a contested tax case hearing, 􀁸 The date of a final decision after a contested tax case hearing, or 􀁸 The date the Office of Administrative Hearings dismisses a petition for lack of
jurisdiction because the sole issue is the constitutionality of a statute and not the
application of a statute.
When a taxpayer files a combined return pursuant to a request of the Secretary, the
penalty may not be imposed if the tax is paid within 45 days of following events: 􀁸 The date the return is filed, 􀁸 The date of the notice of proposed assessment based on the return, if the
taxpayer does not timely file a request for review, 􀁸 If the taxpayer files a timely request for review, the date the Departmental review
ends as a result of one of the events listed in the previous paragraph.
( Effective June 30, 2010; SB 897, s. 31.10.( a), S. L. 10- 31. This section shall not be
construed to affect the interpretation of any statute that is the subject of litigation
pending as of the effective date of this act in the General Court of Justice or to affect
any other aspect of such pending litigation. Subsections ( a) and ( b) of this section apply
to penalties and taxes that are assessed but unpaid as of the effective date, except
penalties and taxes that are the subject of pending litigation in a General Court of
Justice as of the effective date, and to penalties and taxes assessed on or after the
effective date.)
G. S. 105- 236( a)( 5)( f) – Negligence Penalty and Combined Return: This new
subdivision prohibits the imposition of a negligence or large tax deficiency penalty on an
amount shown due on a combined return filed pursuant to a request of the Secretary
unless at least one of the following conditions apply: 􀁸 The return is an amended combined return that includes the same corporations
as the initial combined return filed at the request of the Secretary, 􀁸 The Secretary has adopted permanent rules that describe the circumstances
under which a combined return is required, and the Secretary requires a taxpayer
to file a combined return because the taxpayer’s circumstances meet those
described in the rules, 􀁸 Pursuant to a written request from a taxpayer, the Secretary provided written
advice to the taxpayer stating that a combined return is required and the
Secretary requires the taxpayer to file a combined return because the taxpayer’s
circumstances meet those described in the written advice.
42
( Effective June 30, 2010; SB 897, s. 31.10.( b), S. L. 10- 31. This section shall not be
construed to affect the interpretation of any statute that is the subject of litigation
pending as of the effective date of this act in the General Court of Justice or to affect
any other aspect of such pending litigation. Subsections ( a) and ( b) of this section apply
to penalties and taxes that are assessed but unpaid as of the effective date, except
penalties and taxes that are the subject of pending litigation in a General Court of
Justice as of the effective date, and to penalties and taxes assessed on or after the
effective date.)
G. S. 105- 241.9( c)( 2a) – Written Notice Requirements: This new subdivision was
added to require the Department to provide information on a notice of proposed
assessment that includes the date and amount of the failure to pay penalty that will
apply if the proposed assessment is not paid by the date specified. If the proposed
assessment is not paid by the specified date, the failure to pay penalty is considered to
be assessed and applies to the proposed assessment without further notice to the
taxpayer.
( Effective July 17, 2010; SB 1177, s. 8.( a); S. L. 10- 95.)
G. S. 105- 241.11( b) – Considered Filing Date of Request for Review: This
subsection was rewritten to provide that, for a request for review of a proposed
assessment or denial of refund that is mailed, the date of filing is determined in
accordance with G. S. 105- 263 ( see change to G. S. 105- 263 below). For a request for
review that is delivered by another method ( other than in person or by mail), the date
the request for review is considered filed is the date the Department receives it.
( Effective July 17, 2010; SB 1177, s. 10.( b); S. L. 10- 95.)
G. S. 105- 241.11( c) – Request for Review of Failure to Pay Penalty: This new
subsection was added to provide that a taxpayer who does not request a Departmental
review of a proposed assessment may not request a Departmental review of a failure to
pay penalty that is based on that assessment. A request for a Departmental review of a
proposed assessment is considered a request for a Departmental review of the failure
to pay penalty that is based on that assessment.
( Effective July 17, 2010; SB 1177, s. 8.( b); S. L. 10- 95.)
G. S. 105- 241.16 – Judicial Review of Decision after Contested Case Hearing:
This section was clarified to provide that before filing a petition for judicial review, a
taxpayer must pay the amount of tax, penalty, and interest the final decision states is
due.
( Effective July 17, 2010; SB 1177, s. 9; S. L. 10- 95.)
G. S. 105- 241.22( 1) – Collection of Tax: This subdivision permits the Department to
collect a tax when a taxpayer files a return showing an amount due with the return and
43
does not pay the amount shown due. It was amended to exempt combined returns filed
at the request of the Secretary from this provision.
( Effective June 30, 2010; SB 897, s. 31.10.( c), S. L. 10- 31.)
G. S. 105- 242( b) – Attachment and Garnishment: This subsection was amended to
permit the Secretary to submit quarterly to a financial institution information that
identifies a taxpayer and the amount of debt owed to the Department. The financial
institution will search its records and inform the Secretary if it holds any intangible
property that belongs to a taxpayer on the list. The Department must reimburse the
financial institution for its cost in providing the information.
( Effective January 1, 2011; SB 897, s. 31.8.( h), S. L. 10- 31.)
G. S. 105- 242.1 – Garnishment by Electronic Means: This section was amended to
permit the Department to send notice to a garnishee by electronic means. The
Department and the garnishee must have an agreement that establishes protocol for
transmitting the notice and provides an explanation of the liability of the garnishee for
tax owed by a taxpayer and an explanation of the garnishee’s responsibility concerning
the notice. The electronic notice must contain the taxpayer’s name, social security
number or federal identification number, and the amount of tax, interest and penalties
owed by the taxpayer. If the garnishee is a financial institution, it must respond within
20 days. All other garnishees must respond within 30 days after receiving the notice. A
notice of garnishment sent to a financial institution is released when the financial
institution complies with the notice. For all other garnishees, notice of garnishment is
released when the Department sends the garnishee a notice of release that includes the
name and identification number of the taxpayer.
( Effective June 30, 2010; SB 897, s. 31.8.( i), S. L. 10- 31.)
G. S. 105- 256( a)( 2a) – Report: This new subdivision was added to adopt a uniform
reporting requirement for various corporate and personal income tax economic
incentives administered by the Department. By May 1 of each year, the Department will
publish an economic incentives report that contains information on tax credits and tax
refunds for the previous tax year itemized by credit or refund and taxpayer.
( Effective July 1, 2010; SB 1215, s. 1.21, S. L. 10- 166.)
G. S. 105- 259( b)( 6a) – Conforming Change: This subdivision was amended to correct
a statutory reference.
( Effective July 1, 2010; SB 1215, s. 3.7, S. L. 10- 166.)
G. S. 105- 259( b)( 18) – Disclosure: This subdivision was rewritten to delete the
reference to specific information permitted to be disclosed to the State Controller, such
as name, address and account numbers of a taxpayer, and substituted general
44
language to permit the Department to furnish any information needed by the Controller
to implement the setoff debt collection program established under G. S. 147- 86.25, to
verify statewide vendor files, or track debtors of the State.
( Effective June 30, 2010; SB 897, s. 31.8.( g), S. L. 10- 31.)
G. S. 105- 259( b)( 31) – Repealed: This subdivision regarding information that can be
disclosed relative to the Major Computer Manufacturing Facilities credit was repealed
because it is no longer needed.
( Effective July 1, 2010; SB 1215, s. 3.7, S. L. 10- 166.)
G. S. 105- 259( b)( 35) – Repealed: This subdivision regarding information that can be
disclosed relative to the Major Computer Manufacturing Facilities credit was repealed
because it is no longer needed.
( Effective July 1, 2010; SB 1215, s. 3.7, S. L. 10- 166.)
G. S. 105- 259( b)( 37) – Technical Change: This subdivision was amend to delete a
reference to an expired statute in Article 3A.
( Effective July 1, 2010; SB 1215, s. 3.7, S. L. 10- 166.)
G. S. 105- 259( b)( 40) – Disclosure: This new subdivision permits the Department to
furnish to a taxpayer who leases renewable energy property and claims a credit under
G. S. 105- 129.16A information used by the Secretary to adjust the amount of the credit
claimed by the taxpayer. ( This subdivision may be re- numbered by the codifier to
eliminate duplication.)
( Effective for taxable years beginning on or after January 1, 2010; HB 1829, s. 2.( c), S. L.
2010- 167.)
G. S. 105- 259( b)( 40) – Disclosure: This new subdivision permits the Department to
furnish to a nonparticipating tobacco manufacturer the amount of the manufacturer’s
tobacco products that a taxpayer sells in this State and that the Secretary reports to the
Attorney General. ( This subdivision may be re- numbered by the codifier to eliminate
duplication.)
( Effective July 17, 2010; SB 1177, s. 11, S. L. 10- 95.)
G. S. 105- 259( b)( 41) – Disclosure: This new subdivision permits the Department to
furnish to the Division of Forest Resources contact and financial information concerning
companies that are involved in the primary processing of timber products in order for
DENR to comply with the Primary Forest Assessment Act.
( Effective July 1, 2010; SB 897, s. 13.15, S. L. 10- 31.)
45
G. S. 105- 262 – Rules: This section was amended by adding a new subsection to set
out the procedure for notice and public hearing for rules proposed to be adopted under
G. S. 105- 130.6. At least 30 days prior to proposing a rule, the Secretary must: 􀁸 Publish the proposed rule in the North Carolina Register, 􀁸 Submit the rule and a notice of public hearing to the Codifier of Rules, who must
post the proposed rule and the notice of public hearing on the Internet within five
business days, 􀁸 Notify those on the Department’s mailing list and any other interested parties of
its intent to adopt a rule and of the public hearing, 􀁸 Accept written comments on the proposed rule for at least 15 business days prior
to adoption of the rule, and 􀁸 Hold a least one public hearing on the proposed rule no less than five days after
the rule and notice have been published.
( Effective June 30, 2010; SB 897, s. 31.10.( f), S. L. 10- 31.)
G. S. 105- 263( a) – Timely Filing of Mailed Documents and Requests for
Extensions: This new subsection was added to provide that section 7502 of the Code
governs when a return, report, payment, or any other document that is mailed to the
Department is filed. This section of the Code is known as the “ mailbox rule.” Under the
mailbox rule, the date the document is considered filed is the United States postmark
date stamped on the cover in which such return, report, payment, or other document is
mailed. Therefore, a request for review is considered filed when it is mailed, rather than
when it is received by the DOR.
( Effective July 17, 2010; SB 1177, s. 10.( a); S. L. 10- 95.)
G. S. 105- 264( c) – Give Taxpayers Notice of Revised Tax Interpretations: This
subsection was amended to provide that an interpretation that revises a prior
interpretation by expanding the scope of a tax or otherwise increasing the amount of tax
due may not become effective sooner than the following: ( 1) For a tax that is payable on
a monthly or quarterly basis, the first day of a month that is at least 90 days after the
date the revised interpretation is issued. ( 2) For a tax that is payable on an annual
basis, the first day of a tax year that begins after the date the revised interpretation is
issued.
( Effective June 30, 2010; SB 897, s. 31.7A.( a); S. L. 10- 31.)
SETOFF DEBT COLLECTION ACT— Chapter 105A
G. S. 105A- 2 Definitions: The definition of “ debtor” in G. S. 105A- 2( 3) was expanded to
include all persons who owe a debt. “ Person” is defined in G. S. 105- 228.90( b)( 5). A
corresponding change was made to the definition of “ refund” in G. S. 105A- 2( 8). The
46
definition of “ State agency” in G. S. 105A- 2( 9) was expanded to include a community
college.
( Effective June 30, 2010; SB 897, s. 31.8.( d); S. L. 10- 31.)
G. S. 105A- 3( c) Identifying Information: This subsection was rewritten to require
claimant agencies to also obtain the federal identification number, if applicable, of a
debtor.
( Effective June 30, 2010; SB 897, s. 31.8.( e); S. L. 10- 31.)
G. S. 105A- 14( a) Accounting to the Claimant Agency; Credit to Debtor’s
Obligation:
This subsection was rewritten to require the Department to also provide the federal
identification numbers, if applicable, with the transmittal of the net proceeds collected to
a claimant agency.
( Effective June 30, 2010; SB 897, s. 31.8.( f); S. L. 10- 31.)

NORTH CAROLINA
DEPARTMENT OF REVENUE
2010 TAX LAW CHANGES
OFFICE OF THE ASSISTANT SECRETARY
FOR TAX ADMINISTRATION
501 N. Wilmington Street
PO Box 871
Raleigh, NC 27602- 0871
PREFACE
This document is designed for use by personnel in the North Carolina Department of
Revenue. It is available to those outside the Department as a resource document. It
gives a brief summary of the tax law:
􀁸 changes made by prior General Assemblies that take effect for tax year 2010, as
well as,
􀁸 changes made by the 2010 General Assembly, regardless of when they take
effect.
The local sales and use tax changes follow the State sales and use tax changes. The
document does not include law changes that affect the Department of Revenue but do
not affect the tax laws.
For further information on a tax law change, refer to the legislation that made the
change. Administrative rules, bulletins, directives, and other instructions issued by the
Department, as well as opinions issued by the Attorney General’s Office, may provide
further information on the application of a tax law change.
Thomas L. Dixon, Jr.
Assistant Secretary of Revenue
Tax Administration
TABLE OF CONTENTS
Section 1 – PERSONAL TAXES
INDIVIDUAL INCOME TAX
G. S. 105- 134.2A – Income Tax Surtax 1
G. S. 105- 134.6( d)( 7) – Other Adjustments to Taxable Income – Addition to Federal 1
Taxable Income for Certain Net Operating Losses ( NOLs)
G. S. 105- 134.6( d)( 8) – Other Adjustments to Taxable Income – Future Deduction 2
of NOL Addition
G. S. 105- 151.12( a) - Real Property Donated for a Conservation Purpose Can 2
Be Used Only for That Purpose
G. S. 105- 151.29( a)( 4) – Credit for Qualifying Expenses of a Production Company 2
G. S. 105- 151.29( b) – Credit for Qualifying Expenses of a Production Company 2
G. S. 105- 151.29( b1) – Alternate Credit for Qualifying Expenses of a Production 2
Company Repealed
G. S. 105- 151.29( d) – Qualifying Expenses of a Production Company Subject to Audit 3
G. S. 105- 151.29( f) – Credit Limit for Qualifying Expenses of a Production Company 3
Increased
G. S. 105- 159.1( a) – Reference to Political Party 3
TAX CREDIT SUNSETS
G. S. 105- 151.30( f) - Extend Sunset for Tax Credit for Recycling Oyster Shells 3
G. S. 105- 163.015 – Extend Sunset for Tax Credits for Qualified Business 3
Investments
Section 2 – CORPORATE, EXCISE AND INSURANCE TAXES
PRIVILEGE TAXES
G. S. 105- 37.1 – Conforming Change 4
G. S. 105- 37.1( a)( 1) – Gross Receipts Tax on Live Entertainment 4
G. S. 105- 37.1( a)( 2) – Gross Receipts Tax on Ticket Resales 4
G. S. 105- 37.1( a)( 3) – Repealed 4
G. S. 105- 37.1( d) – Local Taxes 5
G. S. 14- 344.1( a) – Internet Ticket Resale 5
TOBACCO PRODUCTS TAX
Chapter 58, Article 92 – Fire Safe Cigarettes 5
G. S. 58- 92- 10 – Definition of Brand Style 5
G. S. 58- 92- 15( p) – Fire Safe Cigarettes Standards Clarification 6
G. S. 105- 113.40A – Technical Correction 6
FRANCHISE TAX
G. S. 105- 122( b)( 1a)– Billings in Excess of Costs 6
G. S. 105- 122( c1)( 2) – Conforming Change 6
G. S. 105- 122( c1)( 3) – Alternative Apportionment Method, 15 Year Option 6
CORPORATION INCOME TAX
G. S. 105- 130.4( i) – Conforming Change 7
G. S. 105- 130.4( s1) – Special Apportionment Formula for a Qualified Capital 7
Intensive Corporation
G. S. 105- 130.4( t1) – Conforming Change 8
G. S. 105- 130.4( t2) – Alternative Apportionment Method, 15 Year Option 8
G. S. 105- 130.5( a)( 10) – Production Credit Not Subject to Add Back 8
G. S. 105- 130.6 – Rules for Combined Return 8
G. S. 105- 130.14 – Consolidated or Combined Returns 9
G. S. 105- 130.34( a) – Real Property Donated for a Conservation Purpose 9
G. S. 105- 130.41( C1) - Conforming Change to State Ports Authority Credit 9
G. S. 105- 130.45( f) - Conforming Change to Manufacturing Cigarettes for 9
Export Credit
G. S. 105- 130.46( k) - Conforming Change to Manufacturing Cigarettes for 9
Export While Increasing Employment and Use of State Ports Credit
G. S. 105- 130.47( a)( 4) – Definition of Qualifying Expenses 10
G. S. 105- 130.47( b) – Production Company Credit 10
G. S. 105- 130.47( b1) – Alternative Credit for Qualifying Expenses of a 10
Production Company Repealed
G. S. 105- 130.47( d) – Expense Verification 10
G. S. 105- 130.47( f) – Credit Limitation 11
G. S. 105- 130.47( h) – Report 11
G. S. 105- 130.48 – Sunset for Recycling Oyster Shells 11
NORTH CAROLINA LIMITED LIABILITY COMPANY
G. S. 57C- 2- 01 – Low- Profit Limited Liability Company 11
INSURANCE GROSS PREMIUMS TAX
G. S. 58- 6- 25 – Insurance Regulatory Charge 11
Section 3 – TAX CREDITS ( Applies to Multiple Schedules)
TAX INCENTIVES FOR NEW AND EXPANDING BUSINESS - ARTICLE 3A
G. S. 105- 129.2( 8a) – Conforming Change 12
G. S. 105- 129.6( b) – Conforming Change 12
BUSINESS AND ENERGY TAX CREDITS - ARTICLE 3B
G. S. 105- 129.15( 2) – Definition of Cost 12
G. S. 105- 129.15( 4b) – Definition of Installation 12
G. S. 105- 129.15( 7) – Definition of Renewable Energy Property Expanded 13
G. S. 105- 129.16A– Credit for Investing in Renewable Energy 13
G. S. 105- 129.16A – Credit Ceiling 13
G. S. 105- 129.16D( b1) – Technical Change 13
G. S. 105- 129.16D( d)– Sunset for Constructing Renewable Fuel Facilities 14
G. S. 105- 129.16F( b)– Sunset for Biodiesel Producers 14
G. S. 105- 129.16I – Credit for a Renewable Energy Property Facility 14
G. S. 105- 129.16J. – Temporary unemployment insurance refundable tax credit 14
G. S. 105- 129.19 – Conforming Change 15
TAX INCENTIVES FOR RECYCLING FACILITIES - ARTICLE 3C
G. S. 105- 129.25( 3) – Definition of Large Recycling Facility 15
G. S. 105- 129.26( b) – Large Recycling Facility Credit Repealed 15
G. S. 105- 129.26( e) – Conforming Change 15
G. S. 105- 129.27 – Large Recycling Facility Credit Repealed 15
HISTORIC REHABILITATION TAX CREDITS - ARTICLE 3D
G. S. 105- 129.38 – Conforming Change 15
G. S. 105- 129.39 – Sunset 15
LOW- INCOME HOUSING TAX CREDITS - ARTICLE 3E
G. S. 105- 129.44 - Conforming Change 16
TECHNOLOGY DEVELOPMENT - ARTICLE 3F
G. S. 105- 129.50( 2) – Definition of Full- Time Job 16
G. S. 105- 129.50( 4a) – Definition of Participating Community College 16
G. S. 105- 129.51 – Taxpayer Standards 16
G. S. 105- 129.54 – Report 16
G. S. 105- 129.55 – R& D in an Eco- Industrial Park 17
G. S. 105- 129.56 – Interactive Digital Media Credit 17
TAX INCENTIVES FOR MAJOR COMPUTER MANUFACTURING
FACILITIES - ARTICLE 3G
G. S. 105- 129.60 to 105- 129.66 – Repealed 18
MILL REHABILITATION TAX CREDIT - ARTICLE 3H
G. S. 105- 129.75 – Extend Sunset for Mill Rehabilitation Tax Credits 18
G. S. 105- 129.75A – Report 18
TAX CREDITS FOR GROWING BUSINESSES - ARTICLE 3J
G. S. 105- 129.81 – Definition of Environmental Disqualifying Event 19
G. S. 105- 129.82( a) – Sunset 19
G. S. 105- 129.83( e) – Environmental Impact 19
G. S. 105- 129.83( i) – Forfeiture 20
G. S. 105- 129.83( m) – No Double Benefit 20
G. S. 105- 129.85( b) - Conforming Change 20
TAX INCENTIVES FOR RAILROAD INTERMODAL FACILITIES –
ARTICLE 3K
G. S. 105- 129.98 - Conforming Change 20
TIER DESIGNATION
G. S. 143B- 437.08 – Development Tier Designation 20
Section 4 – SALES AND USE TAX
SALES AND USE TAX
G. S. 105- 164.3 – Definitions 21
G. S. 105- 164.4( a) – Increase in State Sales Tax Rate 21
G. S. 105- 164.4( a)( 6b) – Tax on Digital Property 22
G. S. 105- 164.4( a)( 1j) – Tax on Electricity Sold to Manufacturers and Farmers 22
G. S. 105- 164.4( a)( 3) – Accommodations 22
G. S. 105- 164.4B( e) – Sourcing Principles – Accommodations 23
G. S. 105- 164.13 – Exemptions and Exclusions 23
G. S. 105- 164.14( a1) – Passenger Plane Maximum 25
G. S. 105- 164.14( c) – Certain Governmental Entities 25
G. S. 105- 164.14( c)( 23) – Certain Governmental Entities 25
G. S. 105- 164.14( f) – Information to Counties and Cities 26
G. S. 105- 164.14( g) – Major Recycling Facilities 26
G. S. 105- 164.14( h) – Low Enterprise or Development Tier Machinery 26
G. S. 105- 164.14( j) – Certain Industrial Facilities 26
G. S. 105- 164.14( j)( 3) – Certain Industrial Facilities 26
G. S. 105- 164.14( k) – Reports 26
G. S. 105- 164.14( l) – Aviation Fuel for Motorsports Events 26
G. S. 105- 164.14( m) – Professional Motor Racing Vehicles 27
G. S. 105- 164.14( n) – Analytical Services Supplies 27
G. S. 105- 164.14( o) – Eligible Railroad Intermodal Facilities 27
G. S. 105- 164.14A – Economic Incentive Refunds 27
G. S. 105- 164.14B – Certain Industrial Facilities Refunds 27
G. S. 105- 164.15 – Secretary Shall Provide Forms 28
G. S. 105- 164.16( b1) – Returns and Payment of Taxes- Monthly 28
G. S. 105- 164.16( b2) – Returns and Payment of Taxes- Prepayment 28
G. S. 105- 164.16( d) – Use Tax on Out of State Purchases 28
G. S. 105- 164.29B - Information to Counties and Cities 28
G. S. 105- 164.44F – Distribution of part of telecommunications taxes to cities 29
G. S. 105- 164.44I – Distribution of part of sales tax on video programming and 29
telecommunications
G. S. 105- 164.44I( b) – Distribution of part of sales tax on video programming service 29
and telecommunications service to counties and cities
G. S. 105- 164.44J( b) – Supplemental PEG channel support 30
LOCAL SALES AND USE TAX
G. S. 105- 466( c) – Levy of Tax 30
G. S. 105- 467( b) – Exemptions and Refunds 30
G. S. 105- 487 – Use of Additional Tax Revenue by Counties 30
G. S. 105- 502– ( Effective October 1, 2009) Use of Additional Tax Revenue by 30
Counties
G. S. 105- 522 – City Hold Harmless for Repealed Local Taxes 31
G. S. 105- 523 – County Hold Harmless for Repealed Local Taxes 31
G. S. 105- 523( b)( 2) – County Hold Harmless for Repealed Local Taxes 32
HIGHWAY USE TAX – ARTICLE 5A
G. S. 105- 187.3( b) – Retail Value 32
G. S. 105- 187.6( a) – Full Exemptions 32
SCRAP TIRE DISPOSAL TAX – ARTICLE 5B
G. S. 105- 187.18( b) – Exemptions 32
G. S. 105- 187.19( b) – Use of Tax Proceeds 33
WHITE GOODS DISPOSAL TAX – ARTICLE 5C
G. S. 105- 187.23 – Exemptions and Refunds 33
G. S. 105- 187.24 – Use of Tax Proceeds 33
DRY- CLEANING SOLVENT TAX – ARTICLE 5D
G. S. 105- 187.33 – Exemptions and Refunds 33
MANUFACTURING FUEL AND CERTAIN MACHINERY AND
EQUIPMENT – ARTICLE 5F
G. S. 105- 187.50 – Definitions 33
G. S. 105- 187.51a.( 1) – Tax Imposed on Mill Machinery 34
G. S. 105- 187.51A – Privilege Tax on Manufacturing Fuel 34
G. S. 105- 187.51C – Tax Imposed on Datacenter Machinery and Equipment 34
G. S. 105- 187.51C( a)( 1) – Tax Imposed on Datacenter Machinery and Equipment 34
Section 5 􀀃 – 􀀃 PROPERTY TAX
PROPERTY TAX
G. S. 105- 275( 29a) — Historic Property 35
G. S. 105- 277.1C( b)( 1) — Disabled Veteran Property Tax Homestead Exclusion 35
G. S. 277.1D — Inventory Property Tax Deferral 35
G. S. 105- 278( b) — Historic Property 35
G. S. 105- 278.6( e) — Low or Moderate Income Housing 35
G. S. 105- 330.9 and G. S. 105- 330.11 — Motor Vehicles 36
G. S. 105- 333( 14) — Public Service Company 36
G. S. 105- 333( 21) — Motor Freight Carrier Terminal 36
G. S. 105- 501( b) — Reimbursement to the State for Local Government Services 36
G. S. 105A- 2 and G. S. 105A- 3( c) — Debt Set- Off 36
G. S. 153A- 340, G. S. 153A- 357( c)( 2) and G. S. 105- 360 — Currituck County and 36
Pasquotank County
G. S. 161- 31( b) — Payment of Delinquent Property Taxes 37
G. S. 161- 31 — Payment of Delinquent Property Taxes 37
G. S. 153A- 18( c) — Orange County and Alamance County Boundary 37
Section 6 – MOTOR FUELS
MOTOR FUELS
G. S. 105- 241( b)( 2a) – Reporting and Payment Requirement 38
G. S. 105- 449.37( a)( 1) – Update Reference to the IFTA Agreement 38
G. S. 105- 449.39 – Technical 38
G. S. 105- 449.40( a) – Technical 38
G. S. 105- 449.42 – Technical 38
G. S. 105- 449.42A – Technical 38
G. S. 105- 449.44( b) – Technical 38
G. S. 105- 449.45 – Technical 38
G. S. 105- 449.47A – Motor Carrier Registration Requirement 39
G. S. 105- 449.105A – Partial Repeal of Undyed Kerosene Refund by Distributors 39
G. S. 105- 449.105B – Technical 39
G. S. 105- 449.106( b) – Definition of Taxicab 39
G. S. 105- 449.106( c) – Clarification of Refund Eligibility for Special Mobile Equipment 39
G. S. 105- 449.108( b) – Technical 39
Section 7 – GENERAL ADMINISTRATION
GENERAL ADMINISTRATION
G. S. 105- 228.90( b)( 1b) – Reference to the Internal Revenue Code Updated 40
G. S. 105- 236( a)( 4) – Failure to Pay Penalty 40
G. S. 105- 236( a)( 5)( f) – Negligence Penalty and Combined Return 41
G. S. 105- 241.9( c)( 2a) – Written Notice Requirements 42
G. S. 105- 241.11( b) – Considered Filing Date of Request for Review 42
G. S. 105- 241.11( c) – Request for Review of Failure to Pay Penalty 42
G. S. 105- 241.16 – Judicial Review of Decision after Contested Case Hearing 42
G. S. 105- 241.22( 1) – Collection of Tax 42
G. S. 105- 242( b) – Attachment and Garnishment 43
G. S. 105- 242.1 – Garnishment by Electronic Means 43
G. S. 105- 256( a)( 2a) – Report 43
G. S. 105- 259( b)( 6a) – Conforming Change 43
G. S. 105- 259( b)( 18) – Disclosure 43
G. S. 105- 259( b)( 31) – Repealed 44
G. S. 105- 259( b)( 35) – Repealed 44
G. S. 105- 259( b)( 37) – Technical Change 44
G. S. 105- 259( b)( 40) – Disclosure 44
G. S. 105- 259( b)( 40) – Disclosure 44
G. S. 105- 259( b)( 41) – Disclosure 44
G. S. 105- 262 – Rules 45
G. S. 105- 263( a) – Timely Filing of Mailed Documents and Requests for Extensions 45
G. S. 105- 264( c) – Give Taxpayers Notice of Revised Tax Interpretations 45
SETOFF DEBT COLLECTION ACT- CHAPTER 105A
G. S. 105A- 2 Definitions 45
G. S. 105A- 3( c) Identifying Information 46
G. S. 105A- 14( a) Accounting to the Claimant Agency; Credit to Debtor’s Obligation 46
1
PERSONAL TAXES
INDIVIDUAL INCOME TAX
G. S. 105- 134.2A – Income Tax Surtax: The temporary surtax enacted by the 2009
General Assembly is also effective for the tax year 2010, and is set to expire for taxable
years beginning on or after January 1, 2011. The surtax is in addition to the income tax
imposed by G. S. 105- 134.2 and is computed by multiplying North Carolina income tax
by the applicable percentage determined by filing status and North Carolina taxable
income.
Notwithstanding G. S. 105- 163.15, no addition to tax may be made for tax years
beginning on or after January 1, 2009 and before January 1, 2011, with respect to an
underpayment of income tax to the extent the underpayment was created or increased
by the surtax.
( Effective for taxable years beginning on or after January 1, 2009 and expires for
taxable years beginning on or after January 1, 2011; SB 202, ss. 27A. 1.( b) and ( c); S. L.
09- 451.)
G. S. 105- 134.6( d)( 7) – Other Adjustments to Taxable Income – Addition to Federal
Taxable Income for Certain Net Operating Losses ( NOLs): Under the American
Recovery and Reinvestment Act ( ARRA), P. L. 111- 5, an Eligible Small Business ( ESB)
could elect to carry back an NOL from tax year 2008 for three, four, or five years, rather
than the standard two years. An eligible small business is defined in section
172( b)( 1)( H) of the Code. The Worker, Homeownership, and Business Assistance Act
of 2009 ( WHBAA) modified the ARRA by allowing businesses of every size to carry
back 2008 or 2009 NOLs for up to five years, but with a 50 percent of federal taxable
income limit on NOL offsets in the fifth year, and 100 percent in all remaining four carry
back years.
The General Assembly adopted the provisions of the WHBAA, but enacted adjustments
for certain taxpayers. Taxpayers must add to federal taxable income for tax years 2003,
2004, and 2005, any NOL deduction claimed under section 172( b)( 1)( H) or section
810( b)( 4) of the Code that is not an ESB loss. Similarly, taxpayers must add to taxable
income for tax years 2004, 2005, and 2006, any NOL deduction claimed under section
172( b)( 1)( H) or section 810( b)( 4) of the Code that is not an ESB loss.
( Effective June 30, 2010; SB 897, s. 31.1.( b), S. L. 10- 31.)
SECTION 1
2
G. S. 105- 134.6( d)( 8) – Other Adjustments to Taxable Income – Future Deduction
of NOL Addition: This subdivision was added to provide a future deduction from
federal taxable income for the addition required under G. S. 105- 134.6( d)( 7). A
deduction for one- third of the 2008 NOL absorbed on the 2003, 2004, and 2005 federal
returns or the 2009 NOL absorbed on the 2004, 2005, and 2006 federal returns is
allowed in tax years 2011, 2012, and 2013.
( Effective June 30, 2010; SB 897, s. 31.1.( b), S. L. 10- 31.)
G. S. 105- 151.12( a) - Real Property Donated for a Conservation Purpose Can Be
Used Only for That Purpose: This subsection was amended to clarify that the
property must be both donated and accepted in perpetuity for one of the purposes
stated in the law to qualify for the credit.
( Effective August 2, 2010; HB 1829, s. 5.( b), S. L. 10- 167.)
G. S. 105- 151.29( a)( 4) – Credit for Qualifying Expenses of a Production Company:
This subdivision was rewritten to add new subparagraphs d. and e. Qualifying
expenses now also include employee fringe contributions, including health, pension,
and welfare contributions, as well as per diems, stipends, and living allowances paid for
work being performed in this State.
( Effective for taxable years beginning on or after January 1, 2011 and applies to
expenses incurred for productions ending on or after that date; HB 1973, s. 2.2, S. L. 10-
147.)
G. S. 105- 151.29( b) – Credit for Qualifying Expenses of a Production Company:
This subsection was rewritten to increase the credit percentage from 15% to 25% of the
production company’s qualifying expenses.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.2, S. L.
10- 147.)
G. S. 105- 151.29( b1) – Alternate Credit for Qualifying Expenses of a Production
Company Repealed: The alternative credit included in subsection ( b1) by Senate Bill
943 for tax years beginning on or after January 1, 2010 has been repealed effective for
tax years beginning on or after January 1, 2011. The alternative credit allowed a credit
equal to 25% of the production company’s qualifying expenses less the difference
between the amount of tax paid on purchases subject to tax under G. S. 105- 187.51 and
the amount of sales and use tax that would have been due had the purchases been
subject to the sales and use tax at the combined rate under G. S. 105- 164.3.
( Effective for tax years beginning on or after January 1, 2011; HB 1973, s. 2.2, S. L. 10-
147.)
3
G. S. 105- 151.29( d) – Qualifying Expenses of a Production Company Subject to
Audit: Language was added to clarify that the qualifying expenses are subject to audit
by the Secretary before the credit is allowed.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.2, S. L.
10- 147.)
G. S. 105- 151.29( f) – Credit Limit for Qualifying Expenses of a Production
Company Increased : The subsection was amended to increase the tax credit
limitation from $ 7,500,000 to $ 20,000,000.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.2, S. L.
10- 147.)
G. S. 105- 159.1( a) – Reference to Political Party: This law provides that every
individual whose income tax liability for the tax year is $ 3.00 or more may designate on
his or her income tax return that $ 3.00 of the tax shall be credited to the North Carolina
Political Parties Financing Fund. In the case of a married couple filing a joint return
whose income tax liability is $ 6.00 or more, each spouse may designate on the return
that $ 3.00 of the tax shall be credited. This subsection was rewritten to clarify that
“ political party” has same meaning as defined in G. S. 163- 96.
( Effective July 17, 2010; SB 1177, s. 3, S. L. 10- 95.)
TAX CREDIT SUNSETS
G. S. 105- 151.30( f) - Extend Sunset for Tax Credit for Recycling Oyster Shells:
This subsection was rewritten to extend the sunset for the credit to tax years beginning
on or after January 1, 2013 ( was January 1, 2011).
( Effective July 22, 2010; HB 1973, s. 4.2, S. L. 10- 147.)
G. S. 105- 163.015 – Extend Sunset for Tax Credits for Qualified Business
Investments: The credit for qualified business investments was scheduled to expire for
investments made on or after January 1, 2011. The credit now expires for investments
made on or after January 1, 2013.
( Effective June 30, 2010; SB 897, s. 31.5.( b); S. L. 10- 31.)
4
CORPORATE, EXCISE AND
INSURANCE TAXES
PRIVILEGE TAXES
G. S. 105- 37.1 – Conforming Change: The catchline was rewritten to replace “ dances,
athletic events, shows, exhibitions, and other entertainments” with “ live entertainment
and ticket resales.” The new heading incorporates the expansion of the tax to
admission tickets resold over the internet.
( Effective June 30, 2010; SB 897, s. 31.7.( a), S. L. 10- 31.)
G. S. 105- 37.1( a)( 1) – Gross Receipts Tax on Live Entertainment: This subdivision
was rewritten to replace the references to specific types of entertain subject to the 3%
gross receipts tax set out in subdivisions ( 1), ( 2) and ( 3) with the general term, “ live
entertainment of any kind.” The value of amenities is excluded from the amount subject
to tax. If charges for amenities are not separately stated on the face of an admission
ticket, then the charge subject to the tax is equal to the charge for a ticket to the same
event for a seat that does not include amenities and is located directly in front of or
closest to the seat that includes amenities.
( Effective for charges for admission received on or after August 1, 2010; SB 897,
s. 31.7.( a), S. L. 10- 31.)
G. S. 105- 37.1( a)( 2) – Gross Receipts Tax on Ticket Resales: This subdivision was
rewritten to levy the 3% gross receipts tax on a person engaged in the business of
reselling admission tickets on the Internet under G. S. 14- 344.1( a). The price subject to
tax does not include the face price of the ticket. If the price is not printed on the ticket,
the price subject to tax is the amount charged for the ticket by the reseller less the
amount the reseller paid for the ticket.
( Effective for admission tickets sold on or after January 1, 2011; SB 897, s. 31.7.( a), S.
L. 10- 31.)
G. S. 105- 37.1( a)( 3) – Repealed: The provisions of this subdivision were incorporated
into subdivision ( 1) of this section. Therefore, this subdivision was repealed.
( Effective for admission tickets sold on or after January 1, 2011; SB 897, s. 31.7.( a), S.
L. 10- 31.)
SECTION 2
5
G. S. 105- 37.1( d) – Local Taxes: This subsection was amended to prohibit local
governments from levying a license tax on Internet ticket resellers. Under prior law, a
county was permitted to levy a license tax on events taxed under G. S. 105- 37.1( a)( 3).
This legislation repealed that subdivision and clarified that counties are prohibited from
imposing a license tax on any activity taxed under this section.
( Effective June 30, 2010; SB 897, s. 31.7.( a), S. L. 10- 31.)
G. S. 14- 344.1( a) – Internet Ticket Resale: Under existing law, a person may resell an
admission ticket on the Internet at a price greater than the face value if the venue where
the event will occur does not prohibit such activity and the reseller makes certain
guarantees to protect the purchaser. This section was amended to add an additional
provision requiring the reseller to collect and remit to the State the privilege tax levied
under G. S. 105- 37.1
( Effective June 30, 2010; SB 897, s. 31.7.( b), S. L. 10- 31.)
TOBACCO PRODUCTS TAX
Chapter 58, Article 92 – Fire Safe Cigarettes: This new article adopts a cigarette fire
safety standard already implemented in New York and other states as a safety measure
to reduce the likelihood that cigarettes will cause fires and result in deaths, injuries, and
property damage. The manufacturer must test cigarettes and file a certification with the
Department of Insurance that the cigarettes meet the safety standards. Each package
must be marked to indicate compliance with the safety act. Inventory on hand is
exempt from the marking requirement. However, the retailer or wholesaler must have
documentation to confirm that the cigarettes were purchased prior to the effective date
and that the quantity purchased was comparable to the cigarettes purchased during the
same period of the prior year. The act requires distributors, agents, and retail dealers to
submit to inspection of the products by the Commissioner of Insurance, the Secretary of
Revenue, or the Attorney General, and their employees. The act allows for seizure of
cigarettes in violation of this act by any law enforcement personnel or duly authorized
representative of the Commissioner of Insurance. Seized contraband is to be turned
over to the Department of Revenue for destruction after the manufacturer is given the
opportunity to inspect the cigarettes.
( Effective January 1, 2010; HB 1785, s. 1, S. L. 07- 451.)
G. S. 58- 92- 10 – Definition of Brand Style: This new subdivision was added to define
brand style as a variety of cigarettes distinguished by the tobacco used, tar and nicotine
content, flavoring used, size of the cigarette, filtration on the cigarette, or packaging.
This information is required in the certification submitted to the Commissioner of
Insurance.
( Effective July 1, 2010; HB 1905, s. 1, S. L. 10- 101.)
6
G. S. 58- 92- 15( p) – Fire Safe Cigarettes Standards Clarification: This subsection
was amended to clarify that the standards the Commissioner is to use to implement
Article 58 are in accordance with the “ New York Fire Safety Standards for Cigarettes” as
it read on August 24, 2007.
( Effective January 1, 2010; SB 884, s. 1, S. L. 09- 490.)
G. S. 105- 113.40A – Technical Correction: This section was amended to correct an
error. As originally written, net proceeds of the tax collected under this Article would be
allocated between the General Fund and the University Cancer Research Fund,
resulting in part of the tax on other tobacco products (“ OTP”) and all of the tax collected
on cigarettes being credited to the University Cancer Research Fund. However, the
intent of the section is to credit 3% of the cost price of other tobacco products to the
General Fund and the remainder of the net tax on other tobacco products to the
University Cancer Research Fund. The term “ Article” was replaced with “ Part”.
( Effective July 17, 2010; SB 1177, s. 1, S. L. 10- 95.)
FRANCHISE TAX
G. S. 105- 122( b)( 1a)– Billings in Excess of Costs: The 2009 General Assembly
enacted SB 367 which added this subdivision to specifically exempt billings in excess of
costs from surplus and undivided profits, thus excluding the amount from the
computation of the franchise tax capital stock base. The effective date was for taxable
years beginning on or after January 1, 2010. During the 2010 session, the General
Assembly amended the effective date, making it retroactive for taxable years beginning
on or after January 1, 2007. A taxpayer that included billings in excess of costs in its
franchise tax capital stock base in taxable years 2007, 2008, or 2009 may apply for a
refund. However, the request must be made no later than January 1, 2011. A request
made after that date is barred.
( Effective June 30, 2010; SB 897, ss. 31.9.( a), 31.9( b), S. L. 10- 31. Note: Franchise tax
levied under G. S. 105- 122 is for the income year of the corporation in which it becomes
due.)
G. S. 105- 122( c1)( 2) – Conforming Change: This subsection was amended to clarify
that the Secretary may grant a petition for alternative apportionment method for no more
than three years unless the provisions of new subdivision ( 3) apply.
( Effective for requests for alternative apportionment formulas filed on or after July 11,
2010; HB 713, s. 2( c), S. L. 10- 89.)
G. S. 105- 122( c1)( 3) – Alternative Apportionment Method, 15 Year Option: Under
existing law, a corporation that believes the statutory apportionment methodology
7
subjects a greater portion of its capital stock, surplus and undivided profits to tax than is
attributable to its business in the State may petition the Secretary for permission to use
an alternative method. This new subsection was added to permit the Secretary to grant
a qualifying corporation’s request for alternative apportionment for as many as fifteen
years rather than the three years allowed under subsection ( c1)( 2). To qualify, the
corporation must sign a letter of commitment with the Secretary of Commerce by
September 15, 2010 certifying that it will invest at least $ 500 million in private funds to
construct a facility in a development tier one area within five years after the time
construction begins.
( Effective for requests for alternative apportionment formulas filed on or after July 11,
2010; HB 713, s. 2( c), S. L. 10- 89.)
CORPORATION INCOME TAX
G. S. 105- 130.4( i) – Conforming Change: This subsection was rewritten to conform to
the new special apportionment provision for qualified capital intensive corporations in
G. S. 105- 130.4( s1).
( Effective for taxable years beginning on or after January 1, 2010; SB 575, s. 2, S. L. 09-
54.)
G. S. 105- 130.4( s1) – Special Apportionment Formula for a Qualified Capital
Intensive Corporation: This subsection was enacted to encourage the location and
expansion of capital intensive companies in North Carolina by providing for
apportionment of corporate income based solely on the sales factor for companies that
meet certain investment and quality jobs criteria. A qualified capital intensive
corporation is a corporation that meets all six of the following conditions:
􀁸 the corporation’s property factor exceeds 75% of the sum of its property, payroll,
and sales factors, with the sales factor added twice, for the current year or the
corporation’s average property factor for the preceding three years exceeds 75%
of the average sum of the factors for those years; 􀁸 the Secretary of Commerce makes a written determination that the corporation
has invested or is expected to invest at least one billion dollars in private funds to
construct a facility in this State within nine years after the time the construction
begins. The costs of acquiring and improving land for the facility, costs for
renovations or repairs for existing buildings, and costs of equipping or
reequipping the facility are all included as costs of construction; 􀁸 the corporation maintains the average number of employees it has at the facility
during the first two years after the facility is placed in service for the remainder of
the time in which the corporation must complete the investment; 􀁸 the facility is located in a county that was designated as a development tier one
or two area at the time construction began;
8
􀁸 the corporation satisfies the wage standard prescribed under G. S. 105- 129.83( c)
at the facility; 􀁸 the corporation provides health insurance as prescribed in G. S. 105- 129.83( d) for
all its full- time employees at the facility.
If the corporation fails to invest one billion dollars in private funds within nine years, the
benefit of the special apportionment formula expires and the corporation must apportion
income as otherwise required under G. S. 105- 130.4.
( Effective for taxable years beginning on or after January 1, 2010; SB 575, s. 1, S. L. 09-
54. If no corporation has qualified as a qualified capital intensive corporation prior to
January 1, 2019, then G. S. 105- 130.4( s1) is repealed effective for taxable years
beginning on after January 1, 2019; SB 575, s. 6, S. L. 09- 54.)
G. S. 105- 130.4( t1) – Conforming Change: This subdivision was amended to clarify
that the Secretary may grant a petition for alternative apportionment method for no more
than three years unless the provisions of new subdivision ( t2) apply.
( Effective for requests for alternative apportionment formulas filed on or after July 11,
2010; HB 713, s. 2( a), S. L. 10- 89.)
G. S. 105- 130.4( t2) – Alternative Apportionment Method, 15 Year Option: Under
existing law, a corporation that believes the statutory apportionment methodology
subjects a greater portion of its income to tax than is attributable to its business in the
State may petition the Secretary for permission to use an alternative method. This new
subsection was added to permit the Secretary to grant a qualifying corporation’s request
for alternative apportionment for as many as fifteen years rather than the three years
allowed under subsection ( t1). To qualify, the corporation must sign a letter of
commitment with the Secretary of Commerce by September 15, 2010 certifying that it
will invest at least $ 500 million in private funds to construct a facility in a development
tier one area within five years after the time construction begins. A similar provision
was enacted for franchise tax.
( Effective for requests for alternative apportionment formulas filed on or after July 11,
2010; HB 713, s. 2( b), S. L. 10- 89.)
G. S. 105- 130.5( a)( 10) – Production Credit Not Subject to Add Back: This
subdivision was amended to specifically exempt the production credit allowed under
G. S. 105- 130.47 from the addition to federal taxable income required for amounts
claimed as credits against the corporate income tax.
( Effective for taxable years beginning on or after January 1, 2011; HB 713, s. 1, S. L. 10-
89.)
G. S. 105- 130.6 – Rules for Combined Return: This section was amended to permit
the Secretary to adopt rules that describe the facts and circumstances under which the
9
Secretary will require a corporation to file a combined return. The Secretary will not be
prohibited from requiring a combined return based on facts and circumstances not
described in the rules if he finds that a return filed by a taxpayer does not disclose its
true earnings in the State.
( Effective June 30, 2010; SB 897, s. 31.10.( d), S. L. 10- 31.)
G. S. 105- 130.14 – Consolidated or Combined Returns: This section requires a
corporation that files a consolidated federal income tax return to file a separate entity
return for State purposes unless required by the Secretary to file a consolidated or
combined return. The section was amended to add two other conditions under which a
combined return will be permitted. If the Secretary promulgates rules under G. S. 105-
130.6 setting out the facts and circumstances under which the Secretary will require a
combined return, a corporation whose facts and circumstances meet those of the rule
must file a combined return in accordance with the rules. Additionally, when a
corporation makes a written request of the Secretary and the Secretary provides written
advice based on the facts and circumstances provided by the corporation that he will
require a combined return, the corporation will file a combined returned in accordance
with the written advice.
( Effective June 30, 2010; SB 897, s. 31.10.( e), S. L. 10- 31.)
G. S. 105- 130.34( a) – Real Property Donated for a Conservation Purpose: This
subsection was amended to clarify that the property must be both donated and
accepted in perpetuity for one of the purposes stated in the statute to qualify for the
credit.
( Effective August 2, 2010: HB 1829, s. 5.( a), S. L. 10- 167.)
G. S. 105- 130.41( C1) - Conforming Change to State Ports Authority Credit: To
increase uniformity in reporting requirements for tax credits, a new subdivision was
added to G. S. 105- 256( a). This subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.11, S. L. 10- 166.)
G. S. 105- 130.45( f) - Conforming Change to Manufacturing Cigarettes for Export
Credit: To increase uniformity in reporting requirements for tax credits, a new
subdivision was added to G. S. 105- 256( a). This subsection was amended to reference
the new statute.
( Effective July 1, 2010; SB 1215, s. 1.12, S. L. 10- 166.)
G. S. 105- 130.46( k) - Conforming Change to Manufacturing Cigarettes for Export
While Increasing Employment and Use of State Ports Credit: This section was
amended to replace the existing reporting requirement with a reference to the new
economic incentives report required under G. S. 105- 256 and to set out what information
10
is to be included in that report. The following information will be reported and itemized
by taxpayer: 􀁸 The number of taxpayers who took the credit, 􀁸 The amount of cigarettes and other tobacco products exported through the State
ports with respect to which credits were taken, 􀁸 The percentage of domestic leaf content in cigarettes produced during the
previous year, and 􀁸 The total cost to the General Fund.
( Effective July 1, 2010; SB 1215, s. 1.13, S. L. 10- 166.)
G. S. 105- 130.47( a)( 4) – Definition of Qualifying Expenses: This subdivision was
amended to add employee fringe contributions, including health, pension, and welfare
contributions, as well as per diems, stipends, and living allowances paid for work being
performed in the State to the list of expenses that qualify for the production credit.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.1, S. L.
10- 147.)
G. S. 105- 130.47( b) – Production Company Credit: This subsection was amended to
increase the credit percentage from 15% of the production company’s qualifying
expenses to 25%.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.1, S. L.
10- 147.)
G. S. 105- 130.47( b1) – Alternative Credit for Qualifying Expenses of a Production
Company Repealed: This subsection was added during the 2009 session of the
General assembly to provide an election in computing the amount of credit for qualifying
expenses. In lieu of the existing 15% credit, the taxpayer could choose to compute the
credit at 25%. However, it was required to forfeit the benefit of the special sales tax rate
imposed on mill machinery under G. S. 105- 187.51 by subtracting from the amount of
credit computed at 25% the difference between the amount of tax paid on purchases
subject to the mill machinery rate of 1% and the amount of sales or use tax that would
have been due had the purchases been subject to the combined sales tax rate. The
2010 General Assembly repealed the section.
( Alternative Credit effective for taxable years beginning on or after January 1, 2010; SB
943, s. 1, S. L. 09- 529. Repeal effective for taxable years beginning on or after January
1, 2011; HB 1973, s. 2.1, S. L. 10- 147.)
G. S. 105- 130.47( d) – Expense Verification: This subsection was amended to clarify
that qualifying expenses are subject to audit before the credit is allowed.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.1, S. L.
10- 147.)
11
G. S. 105- 130.47( f) – Credit Limitation: This subsection was amended to increase the
ceiling of the production credit from $ 7.5 million to $ 20 million.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 2.1, S. L.
10- 147.)
G. S. 105- 130.47( h) – Report: To increase uniformity in reporting requirements for tax
credits, a new subdivision was added to G. S. 105- 256( a). This subsection was
amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.14, S. L. 10- 166.)
G. S. 105- 130.48 – Sunset for Recycling Oyster Shells: This subsection was
amended to extend the sunset for two years. The credit is repealed effective for taxable
years beginning on or after January 1, 2013.
( Effective July 22, 2010; HB 1973, s. 4.1, S. L. 10- 147.)
NORTH CAROLINA LIMITED LIABILITY COMPANY
G. S. 57C- 2- 01 – Low- Profit Limited Liability Company: This new section permits the
formation of a low- profit limited liability company. The name of the entity must contain
the words “ low- profit limited liability company” or “ LC3”. Its purpose is to encourage
investment in struggling businesses, particularly by nonprofit organizations. An LC3’ s
articles of organization will state that it is formed for both a business and a charitable
purpose. However, it is considered a for- profit entity. If it fails to comply with its
charitable purpose requirements, it remains a regular LLC. To meet the charitable
purpose requirements, it must accomplish a charitable or educational purpose, its
principal purpose of operation is not the production of income or appreciation of
property, and it operates for no political or legislative purpose.
( Effective August 3, 2010; SB 308, s. 1, S. L. 10- 187.)
INSURANCE GROSS PREMIUMS TAX
G. S. 58- 6- 25 – Insurance Regulatory Charge: The percentage rate to be used in
calculating the insurance regulatory charge under this statute is 5.5% for the 2009
calendar year and 6% for the 2010 calendar year. This charge is a percentage of gross
premiums tax liability.
( Effective August 7, 2009; SB 202, ss. 21.1.( a) - 21.1.( b), S. L. 09- 451.)
12
TAX CREDITS
( Applies to Multiple Schedules)
TAX INCENTIVES FOR NEW AND EXPANDING BUSINESS –
ARTICLE 3A
G. S. 105- 129.2( 8a) – Conforming Change: This subdivision was amended to correct a
statutory reference to a sales tax statute in the definition of eligible major industry.
( Effective July 1, 2010; SB 1215, s. 3.2, S. L. 10- 166.)
G. S. 105- 129.6( b) – Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.1, S. L. 10- 166.)
BUSINESS AND ENERGY TAX CREDITS - ARTICLE 3B
G. S. 105- 129.15( 2) – Definition of Cost: This subsection was amended to add a new
provision for leased property. If the taxpayer claims either a federal energy credit under
section 48 of the Code or a federal grant in lieu of that credit and makes a lease pass-through
election under the Code, the cost of the leased renewable energy property is
the cost determined under the Code rather than eight times the net annual rental rate.
( Effective for taxable years beginning on or after January 1, 2010; HB 1829, s. 2.( a), S. L.
2010- 167.)
G. S. 105- 129.15( 4b) – Definition of Installation: This new subsection was added to
define installation of renewable energy property as property that, standing alone or in
combination with other machinery, equipment, or real property, is able to produce
usable energy on its own.
( Effective for taxable years beginning on or after January 1, 2010; HB 1829, s. 2.( a), S. L.
2010- 167.)
SECTION 3
13
G. S. 105- 129.15( 7) – Definition of Renewable Energy Property Expanded: This
section was amended to add a subsection to expand the definition of renewable energy
property to include combined heat and power system property as defined in section 48
of the Code. Additionally, the definition of wind equipment was expanded to include
equipment required to relay the electricity by cable from the turbine motor to the power
grid. The section was also amended to combine two existing subsections, ( e) and ( f),
that define types of geothermal equipment into one subsection, ( c).
( Effective for taxable years beginning on or after January 1, 2010; HB 1829, s. 2.( a), S. L.
2010- 167.)
G. S. 105- 129.16A– Credit for Investing in Renewable Energy Property: This section
was amended by two separate pieces of legislation. In the first, amendments made to
the renewable energy property credit against North Carolina personal and corporate
income, corporate franchise, and insurance gross premium taxes clarify that the credit
may be claimed for property for which a taxpayer has received federal renewable
energy grants authorized under the American Recovery and Reinvestment Tax Act of
2009. Under the North Carolina statute, taxpayers are precluded from claiming the
credit for property purchased with public funds. The modifications made by this
legislation specify that the Recovery Act grants are not considered public funds for
purposes of this credit.
The second legislation added a provision to require a lessor of renewable energy
property to provide to the lessee a statement that describes the property and states the
cost of the property. It also replaced the terms nonresidential property and residential
property with the terms business and nonbusiness, respectively. Business property
generates useful energy that is offered for sale or is used on- site for a purpose other
than providing energy to a residence.
( Legislation enacted regarding public funds is effective for taxable years beginning on or
after January 1, 2009 and applies to renewable energy property placed in service on or
after that date; SB 388, s. 1, S. L. 2010- 4. The second legislation is effective for taxable
years beginning on or after January 1, 2010; HB 1829, s. 2.( b), S. L. 2010- 167.)
G. S. 105- 129.16A – Credit Ceiling: This new subdivision was added to place a ceiling
of $ 5,000,000 on each installation of renewable energy property placed in service at an
Eco- Industrial Park as defined in G. S. 143B- 437.08.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 5.4, S. L.
10- 147.)
G. S. 105- 129.16D( b1) – Technical Change: This subsection was rewritten to correct a
statutory reference. G. S. 105- 241.1( i) was replaced with G. S. 105- 241.21regarding
interest rate.
( Effective July 17, 2010; SB 1177, s. 2, S. L. 10- 95.)
14
G. S. 105- 129.16D( d)– Sunset for Constructing Renewable Fuel Facilities: This
subsection was amended to extend the sunset. The credit will expire for facilities placed
in service on or after January 1, 2013.
( Effective August 2, 2010; HB 1829, s. 1( a), S. L. 10- 167.)
G. S. 105- 129.16F( b)– Sunset for Biodiesel Producers: This subsection was amended
to extend the sunset. The credit will expire for tax years beginning on or after January 1,
2013.
( Effective August 2, 2010; HB 1829, s. 1( b), S. L. 10- 167.)
G. S. 105- 129.16I – Credit for a Renewable Energy Property Facility: This new
section reinstates and expands the credit for constructing a facility to manufacture
renewable energy property in this State which was codified under G. S. 105- 130.28 and
expired in 2006. The credit is 25% of the cost to construct or convert and equip a
facility to manufacture renewable energy property or a major component subassembly
for a solar array or a wind turbine. The credit is taken in five equal installments
beginning in the year the property is placed in service. If the property is disposed or
taken out of service during any year in which an installment of the credit accrues, the
credit expires and the taxpayer may not take any remaining installments. It may,
however, take any carry forward amount of a previous installment, subject to the five
year carry forward limitation.
( Effective for taxable years beginning on or after January 1, 2011 and expires for
facilities placed in service on or after January 1, 2014; HB 1829, s. 3.( a), S. L. 10- 167.)
G. S. 105- 129.16J. – Temporary unemployment insurance refundable tax credit:
A new section was added to allow a tax credit for small businesses that make
contributions to the State Unemployment Insurance Fund with respect to wages paid for
employment in this State. A small business is defined as a business whose cumulative
gross receipts from the business activity for the tax year do not exceed one million
dollars ($ 1,000,000). The amount of tax credit allowed is 25% of the qualified
contributions to the State Unemployment Insurance Fund and applies to taxable years
2010 and 2011 only.
This credit may be claimed only against corporate and individual income taxes. If the
credit exceeds the amount of tax for the taxable year reduced by the sum of all credits
allowable, the excess is refundable. The refundable excess is governed by the
provisions governing a refund of an overpayment by the taxpayer of the tax imposed in
Article 4. In computing the amount of tax against which multiple credits are allowed,
nonrefundable credits are subtracted before refundable credits.
( Effective for taxes imposed for taxable years beginning on or after January 1, 2010; SB
897; s. 31.1A.( a), S. L. 10- 31.)
15
G. S. 105- 129.19 – Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.2, S. L. 10- 166.)
TAX INCENTIVES FOR RECYCLING FACILITIES - ARTICLE 3C
G. S. 105- 129.25( 3) – Definition of Large Recycling Facility: This subdivision was
deleted because the tax credit for large recycling facilities was repealed.
( Effective July 1, 2010; SB 1215, s. 2.1, S. L. 10- 166.)
G. S. 105- 129.26( b) – Large Recycling Facility Credit Repealed: This subsection was
repealed because the credit for a large recycling facility has never been claimed. Only
the credit for major recycling facility remains.
( Effective July 1, 2010; SB 1215, s. 2.1, S. L. 10- 166.)
G. S. 105- 129.26( e) – Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.3, S. L. 10- 166.)
G. S. 105- 129.27 – Large Recycling Facility Credit Repealed: This section was
rewritten to delete the language that provided a 20% credit for machinery and
equipment placed in service in a large recycling facility. The credit was never claimed.
( Effective July 1, 2010; SB 1215, s. 2.1, S. L. 10- 166.)
HISTORIC REHABILITATION TAX CREDITS - ARTICLE 3D
G. S. 105- 129.38 – Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.4, S. L. 10- 166.)
G. S. 105- 129.39 – Sunset: This section was added to establish a sunset. The credit will
expire for qualified rehabilitation expenses and rehabilitation expenses incurred on or
after January 1, 2014.
( Effective July 1, 2010; SB 1215, s. 1.5, S. L. 10- 166.)
16
LOW- INCOME HOUSING TAX CREDITS - ARTICLE 3E
G. S. 105- 129.44 - Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.6, S. L. 10- 166.)
TECHNOLOGY DEVELOPMENT - ARTICLE 3F
Title Change – The title of Article 3F, Research and Development, was rewritten to
read “ Technology Development” in order to accommodate the new credit for developing
interactive digital media.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 3.1, S. L.
10- 147.)
G. S. 105- 129.50( 2) – Definition of Full- Time Job: This subsection was amended to
add the definition of full- time job to Article 3F and cross- references the definition to
Article 3J, which is a position that requires at least 1,600 hours of work per year and is
intended to be held by one employee during the entire year.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 3.2, S. L.
10- 147.)
G. S. 105- 129.50( 4a) – Definition of Participating Community College: This
subsection was added to define a participating community college as one that offers an
associate in applied science degree in simulation and game development.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 3.2, S. L.
10- 147.)
G. S. 105- 129.51 – Taxpayer Standards: This section was amended to expand the
requirements for eligibility for the credits in Article 3F. In addition to satisfying the
requirements related to the wage standard, health insurance, environmental impact,
and safety and health programs, the taxpayer must also have no overdue tax debts.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 3.3, S. L.
10- 147.)
G. S. 105- 129.54 – Report: This section was amended by two pieces of legislation. As
originally written, the section required the Department to publish a report specific to the
Research and Development credit, itemizing the report by taxpayer. The first
amendment deletes the requirement for a separate report and instead sets out the
17
details that are to be included in a new economic incentives report required under G. S.
105- 256.
The second amendment expands the reporting requirement. With the addition of the
interactive digital media credit to Article 3F, the amended statute requires the
Department to itemize the report by type of credit as well as by taxpayer. Additionally,
with respect to the Research and Development credit, the report must be itemized by
categories of small business, low- tier, university research, other and a new zone
designation, Eco- Industrial Park. The interactive digital media credit must be itemized
by the categories of higher education collaboration and other.
( The amendment to cross reference G. S. 105- 256 is effective July 1, 2010; SB 1215, s.
1.7, S. L. 10- 166. The second amendment is effective for taxable years beginning on or
after January 1, 2011; HB 1973, s. 3.5, S. L. 10- 147.)
G. S. 105- 129.55 – R& D in an Eco- Industrial Park: This section was amended to
create a new category of expense eligible for the research and development credit. A
taxpayer that has qualified North Carolina research expenses is allowed a credit equal
to a percentage of the expenses. The percentage is dependent upon the category
under which the expense falls. The new category is an Eco- Industrial Park certified
under G. S. 143B- 437.08. The percentage of expenses with respect to research
performed in an Eco- Industrial Park is 35%.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 5.5, S. L.
10- 147.)
G. S. 105- 129.56 – Interactive Digital Media Credit: This new section creates a credit
for an industry that develops in this State interactive digital media (“ IDM”) or a digital
platform or engine for use in interactive digital media. IDM is a product that is produced
for distribution on electronic media, including distribution over the Internet, contains a
computer- controlled virtual universe with which an individual interacts in order to
achieve a goal, and contains a significant amount of at least three of the following types
of data: animated images, fixed images, sound, text, and 3D geometry.
The credit is equal to a percentage of the taxpayer’s expenses that exceed $ 50,000.
Qualifying expenses are compensation and wages for a full- time job on which
withholding payments are remitted, employee fringe contributions on compensation and
wages, including health, pension, and welfare contributions, and amounts paid to a
participating community college or a research university for services performed in this
State. The credit is equal to 20% of the allowable expenses paid to a participating
community college or a research university. The credit for other allowable expenses is
limited to 15%. The credit may not exceed $ 7.5 million.
The following types of interactive digital media do not qualify for the credit: 􀁸 developed by the taxpayer for internal use, 􀁸 interpersonal communications service, such as videoconferencing, wireless
telecommunication, a text- based channel, or a chat room,
18
􀁸 an internet site that is primarily static and primarily designed to provide
information about a person or business, 􀁸 gambling or casino game, 􀁸 political advertising, 􀁸 is obscene as defined in G. S. 14- 190.1or is harmful to minors as defined in
G. S. 14- 190.13.
A taxpayer claiming the IDM credit may not claim any other credit under chapter 105 or
a JDIG or One North Carolina Fund grant with respect to the expenses used to
determine the IDM credit. Like the Research and Development credit, the taxpayer
must make a binding election to claim the IDM credit against the income taxes levied in
Article 4 or franchise tax levied in Article 3 and the credit is limited to 50% of the tax.
Unused portions of the credit may be carried forward for 15 years.
( Effective for taxable years beginning on or after January 1, 2011, HB 1973, s. 3.6, S. L.
10- 147.)
TAX INCENTIVES FOR MAJOR COMPUTER MANUFACTURING
FACILITIES - ARTICLE 3G
G. S. 105- 129.60 to 105- 129.66 – Repealed: This Article was repealed.
( Effective July 1, 2010; SB 1215, s. 2.2, S. L. 10- 166.)
MILL REHABILITATION TAX CREDIT - ARTICLE 3H
G. S. 105- 129.75 – Extend Sunset for Mill Rehabilitation Tax Credits: This section
was rewritten to extend the sunset of the Article 3H credits to January 1, 2014, for
rehabilitation projects for which an application for eligibility certification is submitted on
or after that date ( was January 1, 2011).
( Effective June 30, 2010; SB 897, s. 31.5.( a); S. L. 10- 31.)
G. S. 105- 129.75A – Report: This new section was added to set out what information is
to be included in the economic incentives report required under G. S. 105- 256. The
following information will be reported and itemized by taxpayer: 􀁸 The number of taxpayers that took a mill rehabilitation credit, 􀁸 The amount of rehabilitation expenses and qualified rehabilitation expenditures
with respect to which credits were taken, and 􀁸 The total cost to the general fund.
( Effective July 1, 2010; SB 1215, s. 1.8, S. L. 10- 166.)
19
TAX CREDITS FOR GROWING BUSINESSES - ARTICLE 3J
G. S. 105- 129.81 – Definition of Environmental Disqualifying Event: This new
subdivision was added to define events that would result in a taxpayer’s disqualification
for Article 3J credits. Those events include:
A civil penalty assessed against the taxpayer by the Department of Environment and
Natural Resources (“ DENR”) during the tax year in which the activity occurred for which
a credit is being claimed for failure to comply with an order issued by an agency of that
Department to abate or remediate a violation of any program administered by the
agency;
A finding by DENR that the taxpayer, during the tax year in which the activity occurred
for which a credit is being claimed or in the two prior tax years, knowingly and willfully
committed a violation of any program implemented by a DENR agency or was assessed
for damages to fish or wildlife or was issued a judicial order for injunctive relief in
connection with a violation of any DENR program;
A criminal penalty was imposed against the taxpayer in connection with any DENR
agency during the tax year in which the activity occurred for which a credit is being
claimed or in the four prior tax years.
( Effective for credits claimed for taxable years beginning on or after January 1, 2007;
HB 1973, s. 1.3, S. L. 10- 147.)
G. S. 105- 129.82( a) – Sunset: This subdivision was amended to extend the sunset for
two more years. The credit will expire for business activities that occur on or after
January 1, 2013.
( Effective July 22, 2010; HB 1973, s. 1.1, S. L. 10- 147.)
G. S. 105- 129.83( e) – Environmental Impact: This subdivision of the Eligibility and
Forfeiture section was amended to modify the circumstances under which a taxpayer
becomes ineligible for Article 3J credits due to violations of programs administered by
the Department of Environmental and Natural Resources (“ DENR”). A taxpayer
becomes ineligible if there has been a final determination unfavorable to the taxpayer
with respect to an environmental disqualifying event, defined in G. S. 105- 129.81. A
final determination occurs when there is no further opportunity for the taxpayer to seek
administrative or judicial review of the disqualifying event and the disqualifying event
has not been reversed or withdrawn. DENR will provide to the Department by January
31 of each year a list of all environmental disqualifying events for which a final
determination unfavorable to the taxpayer was made during the prior calendar year,
including the taxpayer name and the date the disqualifying event occurred.
( Effective for credits claimed for taxable years beginning on or after January 1, 2007;
HB 1973, s. 1.4, S. L. 10- 147.)
20
G. S. 105- 129.83( i) – Forfeiture: This subdivision of the Eligibility and Forfeiture section
was amended to add a provision that will require a taxpayer to forfeit an Article 3J credit
previously allowed if a final determination unfavorable to the taxpayer with respect to an
environmental disqualifying event is made that is applicable to the year in which the
activity occurred for which the credit was claimed.
( Effective for credits claimed for taxable years beginning on or after January 1, 2007;
HB 1973, s. 1.4, S. L. 10- 147.)
G. S. 105- 129.83( m) – No Double Benefit: This subsection was enacted to prohibit a
corporation that qualifies for the new special apportionment formula for qualified capital
intensive corporations in G. S. 105- 130.4( s1) from also claiming any tax credits under
Article 3J with respect to the facility that caused the corporation to be a qualified capital
intensive corporation.
( Effective for taxable years beginning on or after January 1, 2010; SB 575, s. 3, S. L. 09-
54.)
G. S. 105- 129.85( b) - Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.9, S. L. 10- 166.)
TAX INCENTIVES FOR RAILROAD INTERMODAL FACILITIES –
ARTICLE 3K
G. S. 105- 129.98 - Conforming Change: To increase uniformity in reporting
requirements for tax credits, a new subdivision was added to G. S. 105- 256( a). This
subsection was amended to reference the new statute.
( Effective July 1, 2010; SB 1215, s. 1.10, S. L. 10- 166.)
TIER DESIGNATION
G. S. 143B- 437.08 – Development Tier Designation: This section was amended by
adding a new subsection to designate an Eco- Industrial Park as development tier one.
( Effective for taxable years beginning on or after January 1, 2011; HB 1973, s. 5.1, S. L.
10- 147.)
21
SALES AND USE TAX
SALES AND USE TAX
G. S. 105- 164.3 – Definitions: The 2009 and 2010 General Assembly added and
revised multiple definitions. The changes and their effective dates are as follows:
Delivered electronically – ( 5d). This definition is repealed.
( Effective January 1, 2010; SB 202, s. 27A. 3.( d), S. L. 09- 451.)
Development tier – ( 6a). This definition is added as the classification assigned to an
area pursuant to G. S. 143B- 437.08.
( Effective July 1, 2010; SB 1215, s. 3.3, S. L. 10- 166.)
Eligible Internet datacenter – ( 8e). This definition is amended to indicate the facility is
used primarily or is to be used primary by a business engaged in software publishing
included in industry 511210 of NAICS or an Internet activity included in industry 519130
of NAICS will be considered an eligible Internet datacenter if all other conditions are
met.
( Effective July 1, 2010; SB 1171, s. 1, S. L. 10- 91.)
Load and leave – ( 17a). This definition is repealed.
( Effective January 1, 2010; SB 202, s. 27A. 3.( d), S. L. 09- 451.)
NAICS – ( 23a). This definition is amended to replace a statutory reference with The
North American Industry Classification System adopted by the United States Office of
Management and Budget as of December 31, 2007.
( Effective July 1, 2010; SB 1171, s. 2, S. L. 10- 91.)
G. S. 105- 164.4( a) – Increase in State Sales Tax Rate: The State general rate of tax
increased from 5.5% to 5.75% on October 1, 2009. This occurred simultaneously with
the repeal of the local sales tax under Article 44 as a result of the State’s assumption of
Medicaid responsibilities for the counties. Effective July 1, 2011, the State general rate
of tax is scheduled to decrease from 5.75% to 4.75%.
SECTION 4
22
( Effective October 1, 2009 for sales occurring on or after that date the State general rate
is 4.75%; HB 1473, s. 31.16.4( g), S. L. 07- 323. Effective October 1, 2009 for sales
occurring on or after that date the State general rate is 5.75%; SB 202, s. 27A. 2.( b),
S. L. 09- 451. Effective July 1, 2011 for sales occurring on or after that date the State
general rate is 4.75%; SB 202, s. 27A. 2.( b), S. L. 09- 451.)
G. S. 105- 164.4( a)( 6b) – Tax on Digital Property: This new subdivision imposes the
State general and applicable local rate of tax on digital property that is listed below, is
delivered or accessed electronically, is not considered tangible personal property, and
would be taxable under Article 5 if sold in a tangible medium. The tax applies
regardless of whether the purchaser of the item has the right to use it permanently or to
use it without making continued payments. The tax does not apply to a service that is
taxed under G. S. 105- 164.4( a) or to an information service. The following property is
subject to tax under this subdivision: ( a) an audio work, ( b) an audiovisual work, ( c) a
book, a magazine, a newsletter, a report, or another publication, ( d) a photograph or a
greeting card.
( Effective January 1, 2010; SB 202, s. 27A. 3.( e), S. L. 09- 451.)
G. S. 105- 164.4( a)( 1j) – Tax on Electricity Sold to Manufacturers and Farmers: This
subdivision is repealed effective July 1, 2010.
( Effective October 1, 2007 for sales occurring on or after that date; SB 3, s. 10( c), S. L.
07- 397. The rate is reduced from 1.8% to 1.4%; effective July 1, 2008 for sales
occurring on or after that date; SB 3, s. 10( d), S. L. 07- 397. The rate is further reduced
from 1.4% to 0.8%; effective July 1, 2009 for sales occurring on or after that date; SB 3,
s. 10( e), S. L. 07- 397. The subdivision is repealed and sales of electricity sold to a
manufacturer for use in connection with the operation of a manufacturing facility and
sales of electricity are sold to a farmer to be used for any farming purpose other than
preparing food, heating dwellings, and other household purpose are exempt from tax;
effective July 1, 2010 for sales occurring on or after that date; SB 3, s. 10( f), S. L. 07-
397.)
G. S. 105- 164.4( a)( 3) – Accommodations: This subdivision is amended to modernize
sales tax on accommodations “ A tax at the general rate applies to the gross receipts
derived from the rental of an accommodation. The tax does not apply to a private
residence or cottage that is rented for fewer than 15 days in a calendar year or to an
accommodation rented to the same person for a period of 90 or more continuous days.
Gross receipts derived from the rental of an accommodation include the sales price of
the rental of the accommodation. The sales price of the rental of an accommodation is
determined as if the rental were a rental of tangible personal property. The sales price
of the rental of an accommodation marketed by a facilitator includes charges designated
as facilitation fees and any other charges necessary to complete the rental. A person
who provides an accommodation that is offered for rent is considered a retailer under
this Article. A facilitator must report to the retailer with whom it has a contract the sales
23
price a consumer pays to the facilitator for an accommodation rental marketed by the
facilitator. A retailer must notify a facilitator when an accommodation rental marketed by
the facilitator is completed and, within three business days of receiving the notice, the
facilitator must send the retailer the portion of the sales price the facilitator owes the
retailer and the tax due on the sales price. A facilitator that does not send the retailer
the tax due on the sales price is liable for the amount of tax the facilitator fails to send. A
facilitator is not liable for tax sent to a retailer but not remitted by the retailer to the
Secretary. Tax payments received by a retailer from a facilitator are held in trust by the
retailer for remittance to the Secretary. A retailer that receives a tax payment from a
facilitator must remit the amount received to the Secretary. A retailer is not liable for tax
due but not received from a facilitator. The requirements imposed by this subdivision on
a retailer and a facilitator are considered terms of the contract between the retailer and
the facilitator. A person who, by written contract, agrees to be the rental agent for the
provider of an accommodation is considered a retailer under this Article and is liable for
the tax imposed by this subdivision. The liability of a rental agent for the tax imposed by
this subdivision relieves the provider of the accommodation from liability. A rental agent
includes a real estate broker, as defined in G. S. 93A- 2. The following definitions apply
in this subdivision: a. Accommodation. – A hotel room, a motel room, a residence, a
cottage, or a similar lodging facility for occupancy by an individual. b. Facilitator. – A
person who is not a rental agent and who contracts with a provider of an
accommodation to market the accommodation and to accept payment from the
consumer for the accommodation.”
( Effective January 1, 2011 and applies to gross receipts derived from the rental of an
accommodation on or after that date; SB 897, s. 31.6.( a), S. L. 10- 31. Makes a technical
change to replace “ act” with the word “ section”; SB 1202, s. 10.2., S. L. 10- 123.)
G. S. 105- 164.4B( e) – Sourcing Principles – Accommodations: This is a new
subsection to source the rental of an accommodation, as defined in G. S. 105-
164.4( a)( 3) to the location of the accommodation.
( Effective January 1, 2011 and applies to gross receipts derived from the rental of an
accommodation on or after that date; SB 897, s. 31.6.( b), S. L. 10- 31.)
G. S. 105- 164.13 – Exemptions and Exclusions: The 2009 and 2010 General
Assembly added and amended exemptions. Also included are exemptions enacted by
the 2007 General Assembly with future effective dates. The changes and their effective
dates are as follows:
Fuel sold to farmers – ( 1). This exemption for sales of specific items to a farmer for
use by the farmer in the planting, cultivating, harvesting, or curing of farm crops or in the
production of dairy products, eggs, or animals was rewritten to remove the reference to
“ electricity” in the phrase “ fuel other than electricity.” The sales tax on electricity will be
phased out.
24
( Effective July 1, 2010 for sales occurring on or after that date; SB 3, s. 10( g), S. L. 07-
397.)
Electricity sold to farmers – ( 1b). This is a new exemption for electricity sold to a
farmer to be used for any farming purpose other than preparing food, heating dwellings,
and other household purposes.
( Effective July 1, 2010 for sales occurring on or after that date; SB 3, s. 10( h), S. L. 07-
397.)
Sales of wood chippers – ( 4g). This is a new exemption for sales of wood chippers
that meet all of the following requirements: a. It is designed to be towed by a motor
vehicle. b. It is assigned a 17- digit vehicle identification number by the National Highway
Transportation Safety Association. c. It is sold to a person who purchases a motor
vehicle in this State that is to be registered in another state and who uses the
purchased motor vehicle to tow the wood chipper to the state in which the purchased
motor vehicle is to be registered.
( Effective July 1, 2009 and applies to sales made on or after that date; HB 1973, s. 6.1,
S. L. 10- 147.)
Sales to a telephone company – ( 5b). This exemption is amended to modernize
language. The word “ telephone” was changed to “ telecommunications”. There is no
change in the application of the exemption.
( Effective January 1, 2010 for sales occurring on or after that date; SB 202, s. 27A. 3.( f),
S. L. 09- 451.)
Sales of magazines – ( 28). This exemption is rewritten to delete sales of magazines
by magazine vendors making door to door sales. Therefore magazine subscriptions are
subject to sales and use tax.
( Effective January 1, 2010 for sales occurring on or after that date; SB 202, s. 27A. 3.( f),
S. L. 09- 451.)
Sales of computer software – ( 43a). This exemption is rewritten to delete computer
software delivered electronically or by load and leave. However, computer software
meeting any one of the following descriptions will be exempt: ( a) It is designed to run on
an enterprise server operating system. ( b) It is sold to a person who operates a
datacenter and is used within the datacenter. ( c) It is sold to a person who provides
cable service, telecommunications service, or video programming and is used to
provide ancillary service, cable service, Internet access service, telecommunications
service, or video programming.
( Effective January 1, 2010 for sales occurring on or after that date; SB 202, s. 27A. 3.( f),
S. L. 09- 451.)
25
Sales of computer software or digital property that becomes a component part –
( 43b). This is a new exemption for computer software or digital property that becomes
a component part of other computer software or digital property that is offered for sale
or of a service that is offered for sale.
( Effective January 1, 2010 for sales occurring on or after that date; SB 202, s. 27A. 3.( f),
S. L. 09- 451.)
Sales of electricity and eligible business property for use at an eligible Internet
datacenter – ( 55). This exemption amends subdivision “ a.” to add the stipulation that
eligible business property is property that is capitalized for tax purposes under the code
and is used for the provision of a service included in the business of the primary use of
the datacenter. There was also a grammatical change with the word “ datacenter”
throughout this exemption.
( Effective July 1, 2010; SB 1171, s. 3, S. L. 10- 91.)
Fuel and electricity sold to manufacturers – ( 57). This is a new exemption for fuel
and electricity sold to a manufacturer for use in connection with the operation of a
manufacturing facility.
( Effective July 1, 2010 for sales occurring on or after that date; SB 3, s. 10( h), S. L. 07-
397.)
G. S. 105- 164.14( a1) – Passenger Plane Maximum: Pursuant to S. L. 10- 31 this
subsection is amended to extend the repeal date from January 1, 2011 to January 1,
2013. Pursuant to S. L. 10- 166 this subsection is repealed. The refund provision is
incorporated in G. S. 105- 164.14A as Passenger Air Carrier.
( Effective July 1, 2010; SB 897, s. 31.5.( c), S. L. 10- 31; Effective July 1, 2010; SB 1215,
s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( c) – Certain Governmental Entities: A joint agency created by an
interlocal agreement pursuant to G. S. 160A- 462 to operate a cable system that provides
video programming services is allowed a refund of sales and use tax paid by it on
purchases made on or after July 1, 2007, and before June 30, 2010, to the same extent
allowed to a city under G. S. 105- 164.14( c). Notwithstanding G. S. 105- 164.14, the joint
agency must make a request for a refund in writing before January 1, 2011.
( Effective July 22, 2010; HB 455, s. 1, S. L. 10- 153.)
G. S. 105- 164.14( c)( 23) – Certain Governmental Entities: This new subsection allows
a public library created pursuant to an act of the General Assembly to receive an annual
refund of sales and use tax.
26
( Effective July 1, 2008 and applies to purchases made on or after that date; SB 1177, s.
4.( a), S. L. 10- 95.)
G. S. 105- 164.14( f) – Information to Counties and Cities: This subsection is
repealed, but is added back in G. S. 105- 164.29B.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( g) – Major Recycling Facilities: This subsection is repealed, but is
added back in G. S. 105- 164.14A as Major Recycling Facility.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( h) – Low Enterprise or Development Tier Machinery: This
subsection is repealed, but is added back in G. S. 105- 164.14A as Business Low- Tier
Area.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( j) – Certain Industrial Facilities: This subsection is repealed, but is
added back in G. S. 105- 164.14B as Certain Industrial Facilities Refunds.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( j)( 3) – Certain Industrial Facilities: This subdivision is amended to
add two new sub- subdivisions that are eligible for refund: paper- from- pulp
manufacturing and turbine manufacturing. Paper- from- pulp manufacturing means an
industry primarily engaged in manufacturing or converting paper, other than newsprint
or uncoated groundwood paper, from pulp or pulp products, or in converting purchased
sanitary paper stock or wadding into sanitary paper products. Turbine manufacturing
means an industry primarily engaged in manufacturing turbines or complete turbine
generator set units, such as steam, hydraulic, gas, and wind. Turbine manufacturing
under this provision does not include the manufacturing of aircraft turbines.
( Effective July 1, 2010; SB 1171, s. 4, S. L. 10- 91.)
G. S. 105- 164.14( k) – Reports: This subsection is repealed, but is added back in G. S.
105- 164.14A and G. S. 105- 164.14B.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( l) – Aviation Fuel for Motorsports Events: Pursuant to S. L. 10- 31
this subsection is amended to extend the repeal date from January 1, 2011 to January
1, 2013. Pursuant to S. L. 10- 166 this subsection is repealed. This refund provision is
incorporated in G. S. 105- 164.14A as Motorsports Team or Sanctioning Body.
27
( Effective July 1, 2010; SB 897, s. 31.5.( d), S. L. 10- 31; Effective July 1, 2010; SB 1215,
s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( m) – Professional Motor Racing Vehicles: This subsection is
repealed, but is added back in G. S. 105- 164.14A as Professional Motorsports Team.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( n) – Analytical Services Supplies: This subsection is repealed, but
is added back in G. S. 105- 164.14A as Analytical Services Business.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14( o) – Eligible Railroad Intermodal Facilities: This subsection is
repealed, but is added back in G. S. 105- 164.14A as Railroad Intermodal Facility.
( Effective July 1, 2010; SB 1215, s. 1.17., S. L. 10- 166.)
G. S. 105- 164.14A – Economic Incentive Refunds: This section was added to
combine all of the economic incentive refunds into a more concise organization. The
due date of all of the refunds in this section is standardized to be due six months after
the end of the fiscal year and refunds applied for or after due date are barred. No
substantive requirement change for Passenger Air Carrier from G. S. 105- 164.14( a1)
except for due date. No substantive requirement change for Major Recycling Facility
from G. S. 105- 164.14( g) except for the due date. Business in Low- Tier Area is
amended from G. S. 105- 164.14( h) to only allow refunds of businesses listed in G. S.
105- 129.83( a) in a development tier one area. No substantive requirement change for
Motorsports Team or Sanctioning Body from G. S. 105- 164.14( l). Professional
Motorsports Team is amended from G. S. 105- 164.14( m) to add a repeal date of
January 1, 2014. Analytical Services Business is amended from G. S. 105- 164.14( n) to
add a repeal date of January 1, 2013. Railroad Intermodal Facility is amended from
G. S. 105- 164.14( o) to add a repeal date of January 1, 2038. The first claim for refund
for a taxpayer whose sales tax refund period is changed by this act is due within six
months after June 30, 2010, and applies to purchases during the time period not
covered by the taxpayer’s last claim for a refund.
( Effective July 1, 2010; SB 1215, s. 1.18., S. L. 10- 166.)
G. S. 105- 164.14B – Certain Industrial Facilities Refunds: This section was added to
combine all of the industrial facility refunds into a more concise organization. No
substantive changes for Air Courier Services, Aircraft Manufacturing, Bioprocessing,
Financial services, securities operations, and related systems development, Motor
Vehicle Manufacturing, Pharmaceutical and medicine manufacturing and distribution of
pharmaceuticals and medicines, Semiconductor manufacturing, and Solar electricity
generating material manufacturing from G. S. 105- 164.14( j). Computer Manufacturing is
28
deleted from this section as compared to G. S. 105- 164.14( j) that was repealed effective
July 1, 2010.
( Effective July 1, 2010; SB 1215, s. 1.19., S. L. 10- 166.)
G. S. 105- 164.15 – Secretary Shall Provide Forms: This section is repealed. G. S.
105- 254 continues to set out the Department’s responsibilities to furnish forms.
( Effective July 17, 2010; SB 1177, s. 13, S. L. 10- 95.)
G. S. 105- 164.16( b1) – Returns and Payment of Taxes- Monthly: This subsection is
amended by changing the upper threshold for a monthly filer and payer from less than
$ 10,000 to less than $ 15,000.
( Effective October 1, 2010; SB 897, s. 31.3.( a), S. L. 10- 31. Effective October 1, 2011,
the upper threshold increases to $ 20,000; SB 897, s. 31.3.( c), S. L. 10- 31. The
Department is required to notify taxpayers who are no longer required to make a
monthly prepayment of the next month’s sales and use tax liability after conducting a
review; SB 897, s 31.3.( e), S. L. 10- 31.)
G. S. 105- 164.16( b2) – Returns and Payment of Taxes- Prepayment: This
subsection is amended by changing the lower threshold for monthly with prepayment
filer and payer from at least $ 10,000 to at least $ 15,000.
( Effective October 1, 2010; SB 897, s. 31.3.( b), S. L. 10- 31. Effective October 1, 2011,
the lower threshold increases to at least $ 20,000; SB 897, s. 31.3.( d), S. L. 10- 31. The
Department is required to notify taxpayers who are no longer required to make a
monthly prepayment of the next month’s sales and use tax liability after conducting a
review; SB 897, s 31.3.( e), S. L. 10- 31.)
G. S. 105- 164.16( d) – Use Tax on Out of State Purchases: The subsection that is
effective for taxable years beginning on or after January 1, 2010 is repealed. The effect
is that use tax due by individuals will continue to be reported on the North Carolina
Individual Income Tax Return.
( Effective August 7, 2009; SB 202, s. 27A. 3.( b), S. L. 09- 451.)
G. S. 105- 164.29B - Information to Counties and Cities: This subsection was added
and requires that “ The Secretary must give information on refunds of tax made under
this Article to a designated county or city official within 30 days after the official makes a
written request to the Secretary for the information. For a request made by a county
official, the Secretary must give the official a list of each claimant that received a refund
in the past 12 months of at least one thousand dollars ($ 1,000) of tax paid to the county.
For a request made by a city official, the Secretary must give the official a list of each
claimant that received a refund in the past 12 months of at least one thousand dollars
($ 1,000) of tax paid to all the counties in which the city is located. The list must include
29
the name and address of each of these claimants and the amount of the refund
received from each county covered by the request. A claimant that has received a
refund under this Article of tax paid to a county must give information on the refund to a
designated official of the county or a city located in the county. The claimant must give
the information to the county or city official within 30 days after the official makes a
written request to the claimant for the information. For a request by a county or city
official, the claimant must give the official a copy of the request for the refund and any
supporting documentation requested by the official to verify the request. If a claimant
determines that a refund it has received under this Article is incorrect, the claimant must
file an amended request for a refund. For purposes of this section, a designated county
official is the chair of the board of county commissioners or a county official designated
in a resolution adopted by the Board, and a designated city official is the mayor of the
city or a city official designated in a resolution adopted by the city's governing board.
Information given to a county or city official under this section is not a public record and
may not be disclosed except as provided in G. S. 153A- 148.1 or G. S. 160A- 208.1."
( Effective July 1, 2010; SB 1215, s. 1.20, S. L. 10- 166.)
G. S. 105- 164.44F – Distribution of part of telecommunications taxes to cities: This
section is rewritten to reduce the distributable percentage amounts on
telecommunications service and ancillary service to cities and counties. This is to hold
the State harmless as a result of the temporary one percent ( 1%) increase of the
“ combined general rate” for telecommunications service and ancillary service.
( Effective October 1, 2009 for distributions for months beginning on or after that date;
SB 202, s. 27A. 2.( c), S. L. 09- 451. Effective July 1, 2011, the reduced distributable
percentage amounts are repealed; SB 202, s. 27A. 2.( c), S. L. 09- 451.)
G. S. 105- 164.44I – Distribution of part of sales tax on video programming and
telecommunications: This section is rewritten to reduce the distributable percentage
amounts on telecommunications service and video programming service to cities and
counties. This is to hold the State harmless as a result of the temporary one percent
( 1%) increase of the “ combined general rate” for telecommunications service and video
programming service.
( Effective October 1, 2009 for distributions for months beginning on or after that date;
SB 202, s. 27A. 2.( d), S. L. 09- 451. Effective July 1, 2011, the reduced distributable
percentage amounts are repealed; SB 202, s. 27A. 2.( d), S. L. 09- 451.)
G. S. 105- 164.44I( b) – Distribution of part of sales tax on video programming
service and telecommunications service to counties and cities: This subsection
was amended and specifies that the amount of supplemental PEG channel support that
the Secretary must include in each quarterly distribution to a city or county is “ one-fourth
of the share of each qualifying PEG channel certified by the city or county under
G. S. 105- 164.44J. The share of each certified PEG channel is the sum of four million
dollars ($ 4,000,000) and the amount of any funds returned to the Secretary in the prior
30
fiscal year under G. S. 105- 164.44J( d) divided by the number of PEG channels certified
under G. S. 105- 164.44J.”
( Effective July 1, 2011; HB 1691, s. 11.( b), S. L. 10- 158.) Applies to distributions made
on or after July 1, 2011, for quarters starting on or after April 1, 2011.
G. S. 105- 164.44J( b) – Supplemental PEG channel support: This subsection was
amended to indicate that “ A county or city may not certify more than three qualifying
PEG channels.”
( Effective July 1, 2010; HB 1691, s. 11.( c), S. L. 10- 158.)
LOCAL SALES AND USE TAX
G. S. 105- 466( c) – Levy of Tax: This subdivision is amended to require the collection of
a new levy to begin on the first day of a calendar quarter instead of the first day of the
month of either January or July. The requirement for the county to give the Secretary at
least 90 days advance notice of a new levy or tax rate change was suspended for the
2010 calendar year. For the 2010 calendar year only, the county must give the
Secretary at least 75 days advance notice of a new levy or tax rate.
( Effective July 17, 2010; SB 1177, s 12, S. L. 10- 95. Effective July 17, 2010; SB 1177, s
44, S. L. 10- 95.)
G. S. 105- 467( b) – Exemptions and Refunds: This subdivision is amended to reflect
the addition of G. S. 105- 164.14A and G. S. 105- 164.14B.
( Effective July 1, 2010; SB 1215, s 3.8, S. L. 10- 166.)
G. S. 105- 487 – Use of Additional Tax Revenue by Counties: This subsection
amends the length of time requiring a county to reserve thirty percent ( 30%) of revenue
received from this Article for the public school capital outlay fund in each county. The
sunset provision is deleted, ensuring the public outlay fund will continue to be funded at
its current level in perpetuity.
( Effective January 1, 2010 for sales made on or after that date; HB 311, s 1, S. L. 09-
395.)
G. S. 105- 502 – ( Effective October 1, 2009) Use of Additional Tax Revenue by
Counties: This subsection amends the length of time requiring a county to reserve
sixty percent ( 60%) of revenue received specified calculation from this Article for the
public school capital outlay fund in each county. The sunset provision is deleted,
ensuring the public outlay fund will continue to be funded at its current level in
perpetuity.
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( Effective January 1, 2010 for sales made on or after that date; HB 311, s. 2, S. L. 09-
395.)
G. S. 105- 522 – City Hold Harmless for Repealed Local Taxes: This is a new section
providing a municipality that was incorporated on or before October 1, 2008 and
receives a sales and use tax distribution under G. S. 105- 472 receives a hold harmless
amount. The hold harmless amount is 50% of the amount of sales and use tax revenue
distributed for a month to the municipality under Article 40 other than revenue from
sales of qualifying food subject to only the 2% local tax. A county must hold the
municipalities harmless from the repeal of the taxes formerly imposed under Article; the
municipality’s hold harmless amount is to be added to the municipality’s monthly
distribution. The revenue for the hold harmless distribution is obtained by reducing
each county’s monthly allocation under G. S. 105- 472( b) or under the corresponding
provision in the Mecklenburg first one- cent sales tax act by the hold harmless amounts
for the municipalities in that county.
( Effective October 1, 2008 for distributions for months beginning on or after that date;
HB 1473, s. 31.16.3( f), S. L. 07- 323. The calculation of the repealed sales tax amount is
changed for fiscal year 2008- 2009; effective October 1, 2008 for distributions for months
beginning on or after that date; HB 1473, s. 31.16.3( g), S. L. 07- 323. Repealed ( Effective
July 28, 2008; SB 1704, s. 15( b), S. L. 08- 134.) The calculation of the hold harmless
amount is amended; effective October 1, 2009 for distributions for months beginning on
or after that date; HB 1473, s. 31.16.4( c), S. L. 07- 323. Repealed ( Effective July 28,
2008; SB 1704, s. 15( c), S. L. 08- 134.) For the 2009- 2010 fiscal year, further changes
are made in the method of calculating the repealed sales tax amount; effective October
1, 2009; HB 1473, s. 31.16.4( e), S. L. 07- 323. Repealed ( Effective July 28, 2008; SB
1704, s. 15( e), S. L. 08- 134.) Further revisions are made in the method of calculating
the hold harmless amount; effective October 1, 2009 for distributions for months
beginning on or after that date; HB 714, s. 14.4( a), S. L. 07- 345.) Repealed ( Effective
July 28, 2008; SB 1704, s. 15( f), S. L. 08- 134.)
G. S. 105- 523 – County Hold Harmless for Repealed Local Taxes: This is a new
section requiring the Secretary to make hold harmless payments to a county if the
“ repealed sales tax amount” for a fiscal year exceeds the county’s “ hold harmless
threshold.” These terms are defined in this section. To determine if the county is
eligible for a hold harmless payment, the Secretary must estimate a county’s repealed
sales tax amount and hold harmless threshold for a fiscal year and must send an
eligible county 90% of its estimated hold harmless payment with the monthly distribution
made under G. S. 105- 472 for March of that year. At the end of each fiscal year, the
Secretary is required to determine the difference between a county’s repealed sales tax
amount and its hold harmless threshold for that year and send the remainder of the
county’s hold harmless payment for the fiscal year ended June 30 by August 15. The
intent of this section is that each county benefit by at least $ 500,000 annually from the
exchange of a portion of the local sales and use taxes for the State’s assumption of
responsibility for the non- administrative costs of Medicaid.
32
( Effective October 1, 2008 for distributions for months beginning on or after that date;
HB 1473, s. 31.16.3( f), S. L. 07- 323. The calculation of the repealed sales tax amount is
changed for fiscal year 2008- 2009; effective October 1, 2008 for distributions for months
beginning on or after that date; HB 1473, s. 31.16.3( g), S. L. 07- 323. Repealed ( Effective
July 28, 2008; SB 1704, s. 15( b), S. L. 08- 134.) The calculation of the hold harmless
amount is amended; effective October 1, 2009 for distributions for months beginning on
or after that date; HB 1473, s. 31.16.4( d), S. L. 07- 323. Repealed ( Effective July 28,
2008; SB 1704, s. 15( d), S. L. 08- 134.) For the 2009- 2010 fiscal year, further changes
are made in the method of calculating the repealed sales tax amount; effective October
1, 2009; HB 1473, s. 31.16.4( e), S. L. 07- 323. Repealed ( Effective July 28, 2008; SB
1704, s. 15( e), S. L. 08- 134.) Further revisions are made in the method of calculating
the repealed sales tax amount; effective October 1, 2009 for distributions for months
beginning on or after that date; HB 714, s. 14.4( b), S. L. 07- 345.) Repealed ( Effective
July 28, 2008; SB 1704, s. 15( f), S. L. 08- 134.) Further amendments to provide a due
date for county hold harmless estimate and final calculation ( Effective July 17, 2010; SB
1177, s. 14, S. L 10- 95.)
G. S. 105- 523( b)( 2) – County Hold Harmless for Repealed Local Taxes: This amends
the definition of “ Hold Harmless Threshold” to ensure that a county’s Medicaid service
costs for the fiscal years 2008- 2009, 2009- 2010, and 2010- 2011 are determined without
regard to the changes made to the Federal Medical Assistance Percentage by section
5001 of the American Recovery and Reinvestment Act of 2009.
( Effective July 31, 2009 and applies to distributions for months beginning on or after
October 1, 2008; HB 102, s. 4.( a), S. L. 09- 399.)
HIGHWAY USE TAX – ARTICLE 5A
G. S. 105- 187.3( b) – Retail Value: This definition is amended to combine “( b) Retail
Value” and “( b1) Retail Value of Transferred Department of Defense Vehicles.” There is
no substantive change.
( Effective July 17, 2010; SB 1177, s. 5, S. L. 10- 95.)
G. S. 105- 187.6( a) – Full Exemptions: This subsection is amended by adding a new
subdivision for a full exemption of Highway Use Tax as a result of a certificate of title
transfer to a revocable trust from an owner who is the sole beneficiary of the trust.
( Effective July 17, 2010; SB 1177, s. 6, S. L. 10- 95.)
SCRAP TIRE DISPOSAL TAX – ARTICLE 5B
G. S. 105- 187.18( b) – Exemptions: This subdivision is amended to reflect the addition
of G. S. 105- 164.14A and G. S. 105- 164.14B by referencing Article 5 of this Chapter.
33
( Effective July 1, 2010; SB 1215, s 3.4, S. L. 10- 166.)
G. S. 105- 187.19( b) – Use of Tax Proceeds: This subsection is temporarily amended
to credit taxes levied during the 2010- 2011 fiscal year to the General Fund the net tax
proceeds that G. S. 105- 187.19( b) directs the Secretary of Revenue to credit to the
Scrap Tire Disposal Account. This subsection was further amended to clarify that the
transfer applies to distributions made by the Secretary during the 2010- 2011 fiscal year.
( Effective July 1, 2010; SB 897, s. 2.2.( d), S. L. 10- 31. Effective July 1, 2010; SB 1202,
s. 1.2.( a), S. L. 10- 123.)
WHITE GOODS DISPOSAL TAX – ARTICLE 5C
G. S. 105- 187.23 – Exemptions and Refunds: This section is amended to reflect the
addition of G. S. 105- 164.14A and G. S. 105- 164.14B by referencing Article 5 of this
Chapter.
( Effective July 1, 2010; SB 1215, s 3.5, S. L. 10- 166.)
G. S. 105- 187.24 – Use of Tax Proceeds: This subsection is temporarily amended to
credit taxes levied during the 2010- 2011 fiscal year to the General Fund the net tax
proceeds that G. S. 105- 187.24 directs the Secretary of Revenue to credit to the White
Goods Management Account. This subsection was further amended to clarify that the
transfer applies to distributions made by the Secretary during the 2010- 2011 fiscal year.
( Effective July 1, 2010; SB 897, s. 2.2.( e), S. L. 10- 31. Effective July 1, 2010; SB 1202,
s. 1.2.( b), S. L. 10- 123.)
DRY- CLEANING SOLVENT TAX – ARTICLE 5D
G. S. 105- 187.33 – Exemptions and Refunds: This section is amended to reflect the
addition of G. S. 105- 164.14A and G. S. 105- 164.14B by referencing Article 5 of this
Chapter.
( Effective July 1, 2010; SB 1215, s 3.6, S. L. 10- 166.)
MANUFACTURING FUEL AND CERTAIN MACHINERY AND
EQUIPMENT – ARTICLE 5F
G. S. 105- 187.50 – Definitions: This section is amended to delete the definition for
eligible datacenter.
34
( Effective July 1, 2010; SB 1171, s. 5, S. L. 10- 91.)
G. S. 105- 187.51a.( 1) – Tax Imposed on Mill Machinery: This subsection is amended
to exclude a production company from qualifying for the 1% privilege tax levied on the
purchase of mill machinery or mill machinery parts or accessories. Purchases by
motion picture and film production companies will be subject to the general state and
local tax rates.
( Effective January 1, 2011; HB 1973, s. 2.3, S. L. 10- 147.)
G. S. 105- 187.51A – Privilege Tax on Manufacturing Fuel: This section is rewritten to
reflect a reduction in the privilege tax rate imposed on a manufacturing industry or plant
that purchases fuel to operate the industry or plant. The section is repealed and
purchases of fuel for use in connection with the operation of a manufacturing facility are
exempt from tax effective July 1, 2010.
( Effective October 1, 2007 for fuel purchased on or after that date; SB 3, s. 12( a), S. L.
07- 397. The rate is reduced from 0.7% to 0.5%; effective July 1, 2008 for fuel
purchased on or after that date; SB 3, s. 12( b), S. L. 07- 397. The rate is further reduced
from 0.5% to 0.3%; effective July 1, 2009 for fuel purchased on or after that date; SB 3,
s. 12( c), S. L. 07- 397. The section is repealed; SB 3, s. 12( d), S. L. 07- 397.)
G. S. 105- 187.51C – Tax Imposed on Datacenter Machinery and Equipment: This
section is amended to add subsection ( a1) Requirements that the Secretary of
Commerce must certify before the datacenter is eligible. As a result subsection ( a) is
amended to delete the reference to eligible datacenter as defined in G. S. 105- 164.3( 8e)
and adds reference to subsection ( a1). Subsection ( a2) is added to reference a second
datacenter and sets out the requirements for qualifying for the 1% privilege tax.
Subsection ( a3) is added to reference contractors and subcontractors of the datacenters
as being eligible to purchase machinery and equipment at the 1% privilege tax.
Subsection ( b) Rate and Scope is amended to state that the tax does not apply to
equipment and machinery of an eligible Internet datacenter that is exempt from sales
tax under G. S. 105- 164.13( 55). Subsection ( d) is amended to extend the sunset of this
section to July 1, 2015.
( Effective July 1, 2010; SB 1171, s. 7, S. L. 10- 91.)
G. S. 105- 187.51C( a)( 1) – Tax Imposed on Datacenter Machinery and Equipment:
This subdivision is amended to delete “ and software” from the items considered to be
machinery and equipment in the datacenter. Software is exempt under G. S. 105-
164.13( 43a) b. when sold to a person who operates a datacenter and the software is
used in the datacenter.
( Effective July 1, 2010; SB 1171, s. 6, S. L. 10- 91.)
35
PROPERTY TAX
PROPERTY TAX
G. S. 105- 275( 29a) — Historic Property: Technical change which clarifies that all liens
arising under this subdivision are extinguished upon the location of an historic structure
on the site within the time period allowed under this subdivision.
( Effective July 17, 2010; SB 1177, s. 15, S. L. 2010- 95.)
G. S. 105- 277.1C( b)( 1) — Disabled Veteran Property Tax Homestead Exclusion:
Adds a new section which allows a residence owned by a deceased veteran to qualify
for the disabled veteran property tax exclusion, if the United States Department of
Veterans Affairs or another federal agency has certified that, as of January 1, preceding
the taxable year for which the exclusion allowed by this section is claimed, the veteran’s
death was the result of a service- connected condition. Defines service connected as
defined in 38 U. S. C. § 101.
( Effective July 17, 2010; SB 1177, s. 16, S. L. 2010- 95.)
G. S. 277.1D — Inventory Property Tax Deferral: Allows the taxes on a residence
constructed by a builder and owned by the builder or a business entity of which the
builder is a member, as defined in G. S. 105- 277.2 to be deferred until a disqualifying
event occurs.
( Effective for taxes imposed for taxable years beginning on or after July 1, 2010; HB
1249, s. 1, S. L. 2010- 140.)
G. S. 105- 278( b) — Historic Property: Technical change which clarifies that no
deferred taxes are due and all liens arising under this subdivision are extinguished
when the property’s historical significance is lost or substantially impaired due to fire or
other natural disaster.
( Effective July 17, 2010; SB 1177, s. 17, S. L. 2010- 95.)
G. S. 105- 278.6( e) — Low or Moderate Income Housing: Technical change which
clarifies that all liens arising under this subdivision are extinguished when the property is
used for low or moderate income housing within the time period allowed under this
subdivision.
( Effective July 17, 2010; SB 1177, s. 18, S. L. 2010- 95.)
SECTION 5
36
G. S. 105- 330.9 and G. S. 105- 330.11 — Motor Vehicles: Amends the effective date of
the combined property tax and vehicle registration system provided for by House Bill
1779.
( Effective July 17, 2010; SB 1177, s. 21 and 22, S. L. 2010- 95.)
G. S. 105- 333( 14) — Public Service Company: Amends the definition of public service
company by removing the reference to radio common carrier company as defined in
G. S. 62- 119( 3).
( Effective July 17, 2010; SB 1177, s. 19, S. L. 2010- 95.)
G. S. 105- 333( 21) — Motor Freight Carrier Terminal: Adds the following definition for
a terminal: A motor freight carrier facility that includes buildings for the handling and
temporary storage of freight pending transfer between locations. The term also includes
a facility that handles truckloads only and typically consists of a wide, open space where
rolling stock is parked and a building for offices and maintenance of rolling stock.
( Effective July 17, 2010; SB 1177, s. 20, S. L. 2010- 95.)
G. S. 105- 501( b) — Reimbursement to the State for Local Government Services:
Changes the method by which the State is reimbursed for costs incurred by the
Department of Revenue for performing duties imposed by Article 15 and the costs
incurred by the North Carolina Property Tax Commission.
( Effective July 1, 2010; SB 897, s. 26.1( a), S. L. 2010- 31.)
G. S. 105A- 2 and G. S. 105A- 3( c) — Debt Set- Off: Changes the definition of a Debtor
from an “ individual” to “ a person who owes a debt.” Adds the requirement that
whenever possible, all claimant agencies shall obtain and provide to the Department of
Revenue the full name, social security number or federal identification number, address,
and any other identifying information required by the Department of Revenue.
( Effective July 1, 2010; SB 897, s. 31.8( d), 31.8( e), and 31.8( f), S. L. 2010- 31.)
G. S. 153A- 340, G. S. 153A- 357( c)( 2) and G. S. 105- 360 — Currituck County and
Pasquotank County: Provides that Currituck County may prohibit the issuance of a
land- use permit or a building permit to a delinquent taxpayer and allows Pasquotank
County to set the tax prepayment discount by June 30, 2010.
( Effective June 30, 2010; HB 1953, s. 2, 3, and 4, S. L. 2010- 30.)
37
G. S. 161- 31( b) — Payment of Delinquent Property Taxes: Adds Dare and McDowell
counties to the list of counties authorized to require the payment of delinquent property
taxes before recording deeds conveying property.
( Effective July 1, 2010; HB 1754, s. 1, S. L. 2010- 44.)
G. S. 161- 31 — Payment of Delinquent Property Taxes: Provides that the Duplin
County Board of Commissioners may by resolution require the register of deeds not to
accept any deed transferring real property for registration unless the county tax collector
has certified that no county or municipal ad valorem taxes are a lien on the property or
that no other taxes which have been charged to the collector are a lien on the property.
This act only applies to Duplin County.
( Effective June 28, 2010; HB 1673, s. 1, S. L. 2010- 24.)
G. S. 153A- 18( c) — Orange County and Alamance County Boundary: Enables the
transition of properties of the area along the common boundary between Alamance
County and Orange County due to the 2008 North Carolina Geodetic Survey.
( Effective July 1, 2010; SB 1362, s. 1, S. L. 2010- 61.)
38
MOTOR FUELS
MOTOR FUELS
G. S. 105- 241( b)( 2a) – Reporting and Payment Requirement: This statute was
amended to require all taxpayers who file returns electronically to also pay any liability
from those filed returns electronically.
( Effective July 17, 2010; SB 1177, s. 25, S. L. 10- 95.)
G. S. 105- 449.37( a)( 1) – Update Reference to the IFTA Agreement: This statute was
amended update the reference to the International Fuel Tax Agreement.
( Effective July 17, 2010; SB 1177, s. 27, S. L. 10- 95.)
G. S. 105- 449.39 – Technical: This statute was amended to make the reference to tax
returns uniform.
( Effective July 17, 2010; SB 1177, s. 26( a), S. L. 10- 95.)
G. S. 105- 449.40( a) – Technical: This statute was amended to make the reference to
tax returns uniform.
( Effective July 17, 2010; SB 1177, s. 26( b), S. L. 10- 95.)
G. S. 105- 449.42 – Technical: This statute was amended to make the reference to tax
returns uniform.
( Effective July 17, 2010; SB 1177, s. 26( c), S. L. 10- 95.)
G. S. 105- 449.42A – Technical: This statute was amended to make the reference to tax
returns uniform. This statute was further amended to reword subsection ( b) for clarity.
( Effective July 17, 2010; SB 1177, s. 26( d), S. L. 10- 95.)
G. S. 105- 449.44( b) – Technical: This statute was amended to make the reference to
tax returns uniform.
( Effective July 17, 2010; SB 1177, s. 26( e), S. L. 10- 95.)
G. S. 105- 449.45 – Technical: This statute was amended to make the reference to tax
returns uniform.
( Effective July 17, 2010; SB 1177, s. 26( f), S. L. 10- 95.)
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G. S. 105- 449.47A – Motor Carrier Registration Requirement: This statute was
amended to provide that motor carriers who wish to register with North Carolina as its
base state under the IFTA must be incorporated in this State or authorized to transact
business in this State.
( Effective July 17, 2010; SB 1177, s. 28, S. L. 10- 95.)
G. S. 105- 449.105A – Partial Repeal of Undyed Kerosene Refund by Distributors:
This statute was amended to repeal some of the purposes for which a distributor may
obtain a monthly refund of the motor fuel tax the distributor paid on undyed kerosene.
Specifically, a distributor may no longer sell untaxed, undyed kerosene to retailers with
blocked pumps for non- highway purposes. All undyed kerosene sold to a retailer for
resale must include the tax. The end- user ( person purchasing the fuel for use) would file
a Gas- 1201 Claim for Refund, Tax- paid Motor Fuel Used for Off- Highway.
( Effective January 1, 2011 and applies to sales of undyed kerosene made by a
distributor on or after that date; SB 1177, s. 29, S. L. 10- 95.)
G. S. 105- 449.105B – Technical: This statute was amended to remove a word created
by a redlining error.
( Effective July 17, 2010; SB 1177, s. 30, S. L. 10- 95.)
G. S. 105- 449.106( b) – Definition of Taxicab: This statute was amended to provide for
a definition of taxicab that was substantially the same as the one that existed in G. S. 20-
87( 1), prior to repeal.
( Effective July 17, 2010; SB 1177, s. 31( a), S. L. 10- 95.)
G. S. 105- 449.106( c) – Clarification of Refund Eligibility for Special Mobile
Equipment: This statute was amended to clarify that the quarterly refund of motor fuel
tax paid on fuel used to operate special mobile equipment is for the non- highway use of
equipment that is registered as SME under Chapter 20.
( Effective October 1, 2010 and applies to motor fuel purchased on or after this date; SB
1177, s. 31( b), S. L. 10- 95.)
G. S. 105- 449.108( b) – Technical: This statute was amended to require that the
applications for refunds must be filed in the form as required by the Secretary.
( Effective July 17, 2010; SB 1177, s. 32, S. L. 10- 95.)
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GENERAL ADMINISTRATION
GENERAL ADMINISTRATION
G. S. 105- 228.90( b)( 1b) – Reference to the Internal Revenue Code Updated:
The calculation of North Carolina taxable income begins with federal taxable income as
defined under the Internal Revenue Code (“ Code”). State law defines the Code as the
Code enacted as of a certain date. When our State law’s reference date to the Code is
updated each year, that change conforms North Carolina law to federal law that has
been enacted as of that date, except for any items for which specific adjustments are
required by State law.
This subdivision was amended to update the reference to the Internal Revenue Code
from May 1, 2009 to May 1, 2010.
( Effective June 30, 2010; SB 897, s. 31.1.( a); S. L. 10- 31.)
This means that State law has adopted all provisions of the following federal acts
( except for certain NOL provisions) enacted since May 1, 2009:
􀁸 Worker, Homeownership, and Business Assistance Act ( signed by the President
on November 6, 2009; P. L. 111- 92)
􀁸 Haiti Assistance Income Tax Incentive Act ( signed by the President on January
22, 2010; P. L. 111- 126)
􀁸 Hiring Incentives to Restore Employment Act [ HIRE] ( signed by the President on
March 18, 2010: P. L. 111- 147)
􀁸 “ Patient Protection and Affordable Care Act” as amended by “ Health Care and
Education Reconciliation Act of 2010” ( signed by the President on March 23,
2010 and March 30, 2010, respectively; P. L. 111- 148 and P. L. 111- 152)
G. S. 105- 236( a)( 4) – Failure to Pay Penalty: This subsection was amended and a new
subdivision added to set out when the failure to pay penalty may not be imposed. When
the Secretary proposes an assessment for tax due but not shown on the return, the
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penalty may not be imposed if the taxpayer does not file a request for review but pays
the tax within 45 days after the date of the notice.
If the taxpayer files a timely request for review, the failure to pay penalty may not be
imposed if the tax is paid within 45 days of any of the following events: 􀁸 The date the taxpayer and the Department reach a settlement concerning the
amount of tax due, 􀁸 60 days after the date of a final determination and the taxpayer does not timely
petition the Office of Administrative Hearings for a contested tax case hearing, 􀁸 The date of a final decision after a contested tax case hearing, or 􀁸 The date the Office of Administrative Hearings dismisses a petition for lack of
jurisdiction because the sole issue is the constitutionality of a statute and not the
application of a statute.
When a taxpayer files a combined return pursuant to a request of the Secretary, the
penalty may not be imposed if the tax is paid within 45 days of following events: 􀁸 The date the return is filed, 􀁸 The date of the notice of proposed assessment based on the return, if the
taxpayer does not timely file a request for review, 􀁸 If the taxpayer files a timely request for review, the date the Departmental review
ends as a result of one of the events listed in the previous paragraph.
( Effective June 30, 2010; SB 897, s. 31.10.( a), S. L. 10- 31. This section shall not be
construed to affect the interpretation of any statute that is the subject of litigation
pending as of the effective date of this act in the General Court of Justice or to affect
any other aspect of such pending litigation. Subsections ( a) and ( b) of this section apply
to penalties and taxes that are assessed but unpaid as of the effective date, except
penalties and taxes that are the subject of pending litigation in a General Court of
Justice as of the effective date, and to penalties and taxes assessed on or after the
effective date.)
G. S. 105- 236( a)( 5)( f) – Negligence Penalty and Combined Return: This new
subdivision prohibits the imposition of a negligence or large tax deficiency penalty on an
amount shown due on a combined return filed pursuant to a request of the Secretary
unless at least one of the following conditions apply: 􀁸 The return is an amended combined return that includes the same corporations
as the initial combined return filed at the request of the Secretary, 􀁸 The Secretary has adopted permanent rules that describe the circumstances
under which a combined return is required, and the Secretary requires a taxpayer
to file a combined return because the taxpayer’s circumstances meet those
described in the rules, 􀁸 Pursuant to a written request from a taxpayer, the Secretary provided written
advice to the taxpayer stating that a combined return is required and the
Secretary requires the taxpayer to file a combined return because the taxpayer’s
circumstances meet those described in the written advice.
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( Effective June 30, 2010; SB 897, s. 31.10.( b), S. L. 10- 31. This section shall not be
construed to affect the interpretation of any statute that is the subject of litigation
pending as of the effective date of this act in the General Court of Justice or to affect
any other aspect of such pending litigation. Subsections ( a) and ( b) of this section apply
to penalties and taxes that are assessed but unpaid as of the effective date, except
penalties and taxes that are the subject of pending litigation in a General Court of
Justice as of the effective date, and to penalties and taxes assessed on or after the
effective date.)
G. S. 105- 241.9( c)( 2a) – Written Notice Requirements: This new subdivision was
added to require the Department to provide information on a notice of proposed
assessment that includes the date and amount of the failure to pay penalty that will
apply if the proposed assessment is not paid by the date specified. If the proposed
assessment is not paid by the specified date, the failure to pay penalty is considered to
be assessed and applies to the proposed assessment without further notice to the
taxpayer.
( Effective July 17, 2010; SB 1177, s. 8.( a); S. L. 10- 95.)
G. S. 105- 241.11( b) – Considered Filing Date of Request for Review: This
subsection was rewritten to provide that, for a request for review of a proposed
assessment or denial of refund that is mailed, the date of filing is determined in
accordance with G. S. 105- 263 ( see change to G. S. 105- 263 below). For a request for
review that is delivered by another method ( other than in person or by mail), the date
the request for review is considered filed is the date the Department receives it.
( Effective July 17, 2010; SB 1177, s. 10.( b); S. L. 10- 95.)
G. S. 105- 241.11( c) – Request for Review of Failure to Pay Penalty: This new
subsection was added to provide that a taxpayer who does not request a Departmental
review of a proposed assessment may not request a Departmental review of a failure to
pay penalty that is based on that assessment. A request for a Departmental review of a
proposed assessment is considered a request for a Departmental review of the failure
to pay penalty that is based on that assessment.
( Effective July 17, 2010; SB 1177, s. 8.( b); S. L. 10- 95.)
G. S. 105- 241.16 – Judicial Review of Decision after Contested Case Hearing:
This section was clarified to provide that before filing a petition for judicial review, a
taxpayer must pay the amount of tax, penalty, and interest the final decision states is
due.
( Effective July 17, 2010; SB 1177, s. 9; S. L. 10- 95.)
G. S. 105- 241.22( 1) – Collection of Tax: This subdivision permits the Department to
collect a tax when a taxpayer files a return showing an amount due with the return and
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does not pay the amount shown due. It was amended to exempt combined returns filed
at the request of the Secretary from this provision.
( Effective June 30, 2010; SB 897, s. 31.10.( c), S. L. 10- 31.)
G. S. 105- 242( b) – Attachment and Garnishment: This subsection was amended to
permit the Secretary to submit quarterly to a financial institution information that
identifies a taxpayer and the amount of debt owed to the Department. The financial
institution will search its records and inform the Secretary if it holds any intangible
property that belongs to a taxpayer on the list. The Department must reimburse the
financial institution for its cost in providing the information.
( Effective January 1, 2011; SB 897, s. 31.8.( h), S. L. 10- 31.)
G. S. 105- 242.1 – Garnishment by Electronic Means: This section was amended to
permit the Department to send notice to a garnishee by electronic means. The
Department and the garnishee must have an agreement that establishes protocol for
transmitting the notice and provides an explanation of the liability of the garnishee for
tax owed by a taxpayer and an explanation of the garnishee’s responsibility concerning
the notice. The electronic notice must contain the taxpayer’s name, social security
number or federal identification number, and the amount of tax, interest and penalties
owed by the taxpayer. If the garnishee is a financial institution, it must respond within
20 days. All other garnishees must respond within 30 days after receiving the notice. A
notice of garnishment sent to a financial institution is released when the financial
institution complies with the notice. For all other garnishees, notice of garnishment is
released when the Department sends the garnishee a notice of release that includes the
name and identification number of the taxpayer.
( Effective June 30, 2010; SB 897, s. 31.8.( i), S. L. 10- 31.)
G. S. 105- 256( a)( 2a) – Report: This new subdivision was added to adopt a uniform
reporting requirement for various corporate and personal income tax economic
incentives administered by the Department. By May 1 of each year, the Department will
publish an economic incentives report that contains information on tax credits and tax
refunds for the previous tax year itemized by credit or refund and taxpayer.
( Effective July 1, 2010; SB 1215, s. 1.21, S. L. 10- 166.)
G. S. 105- 259( b)( 6a) – Conforming Change: This subdivision was amended to correct
a statutory reference.
( Effective July 1, 2010; SB 1215, s. 3.7, S. L. 10- 166.)
G. S. 105- 259( b)( 18) – Disclosure: This subdivision was rewritten to delete the
reference to specific information permitted to be disclosed to the State Controller, such
as name, address and account numbers of a taxpayer, and substituted general
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language to permit the Department to furnish any information needed by the Controller
to implement the setoff debt collection program established under G. S. 147- 86.25, to
verify statewide vendor files, or track debtors of the State.
( Effective June 30, 2010; SB 897, s. 31.8.( g), S. L. 10- 31.)
G. S. 105- 259( b)( 31) – Repealed: This subdivision regarding information that can be
disclosed relative to the Major Computer Manufacturing Facilities credit was repealed
because it is no longer needed.
( Effective July 1, 2010; SB 1215, s. 3.7, S. L. 10- 166.)
G. S. 105- 259( b)( 35) – Repealed: This subdivision regarding information that can be
disclosed relative to the Major Computer Manufacturing Facilities credit was repealed
because it is no longer needed.
( Effective July 1, 2010; SB 1215, s. 3.7, S. L. 10- 166.)
G. S. 105- 259( b)( 37) – Technical Change: This subdivision was amend to delete a
reference to an expired statute in Article 3A.
( Effective July 1, 2010; SB 1215, s. 3.7, S. L. 10- 166.)
G. S. 105- 259( b)( 40) – Disclosure: This new subdivision permits the Department to
furnish to a taxpayer who leases renewable energy property and claims a credit under
G. S. 105- 129.16A information used by the Secretary to adjust the amount of the credit
claimed by the taxpayer. ( This subdivision may be re- numbered by the codifier to
eliminate duplication.)
( Effective for taxable years beginning on or after January 1, 2010; HB 1829, s. 2.( c), S. L.
2010- 167.)
G. S. 105- 259( b)( 40) – Disclosure: This new subdivision permits the Department to
furnish to a nonparticipating tobacco manufacturer the amount of the manufacturer’s
tobacco products that a taxpayer sells in this State and that the Secretary reports to the
Attorney General. ( This subdivision may be re- numbered by the codifier to eliminate
duplication.)
( Effective July 17, 2010; SB 1177, s. 11, S. L. 10- 95.)
G. S. 105- 259( b)( 41) – Disclosure: This new subdivision permits the Department to
furnish to the Division of Forest Resources contact and financial information concerning
companies that are involved in the primary processing of timber products in order for
DENR to comply with the Primary Forest Assessment Act.
( Effective July 1, 2010; SB 897, s. 13.15, S. L. 10- 31.)
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G. S. 105- 262 – Rules: This section was amended by adding a new subsection to set
out the procedure for notice and public hearing for rules proposed to be adopted under
G. S. 105- 130.6. At least 30 days prior to proposing a rule, the Secretary must: 􀁸 Publish the proposed rule in the North Carolina Register, 􀁸 Submit the rule and a notice of public hearing to the Codifier of Rules, who must
post the proposed rule and the notice of public hearing on the Internet within five
business days, 􀁸 Notify those on the Department’s mailing list and any other interested parties of
its intent to adopt a rule and of the public hearing, 􀁸 Accept written comments on the proposed rule for at least 15 business days prior
to adoption of the rule, and 􀁸 Hold a least one public hearing on the proposed rule no less than five days after
the rule and notice have been published.
( Effective June 30, 2010; SB 897, s. 31.10.( f), S. L. 10- 31.)
G. S. 105- 263( a) – Timely Filing of Mailed Documents and Requests for
Extensions: This new subsection was added to provide that section 7502 of the Code
governs when a return, report, payment, or any other document that is mailed to the
Department is filed. This section of the Code is known as the “ mailbox rule.” Under the
mailbox rule, the date the document is considered filed is the United States postmark
date stamped on the cover in which such return, report, payment, or other document is
mailed. Therefore, a request for review is considered filed when it is mailed, rather than
when it is received by the DOR.
( Effective July 17, 2010; SB 1177, s. 10.( a); S. L. 10- 95.)
G. S. 105- 264( c) – Give Taxpayers Notice of Revised Tax Interpretations: This
subsection was amended to provide that an interpretation that revises a prior
interpretation by expanding the scope of a tax or otherwise increasing the amount of tax
due may not become effective sooner than the following: ( 1) For a tax that is payable on
a monthly or quarterly basis, the first day of a month that is at least 90 days after the
date the revised interpretation is issued. ( 2) For a tax that is payable on an annual
basis, the first day of a tax year that begins after the date the revised interpretation is
issued.
( Effective June 30, 2010; SB 897, s. 31.7A.( a); S. L. 10- 31.)
SETOFF DEBT COLLECTION ACT— Chapter 105A
G. S. 105A- 2 Definitions: The definition of “ debtor” in G. S. 105A- 2( 3) was expanded to
include all persons who owe a debt. “ Person” is defined in G. S. 105- 228.90( b)( 5). A
corresponding change was made to the definition of “ refund” in G. S. 105A- 2( 8). The
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definition of “ State agency” in G. S. 105A- 2( 9) was expanded to include a community
college.
( Effective June 30, 2010; SB 897, s. 31.8.( d); S. L. 10- 31.)
G. S. 105A- 3( c) Identifying Information: This subsection was rewritten to require
claimant agencies to also obtain the federal identification number, if applicable, of a
debtor.
( Effective June 30, 2010; SB 897, s. 31.8.( e); S. L. 10- 31.)
G. S. 105A- 14( a) Accounting to the Claimant Agency; Credit to Debtor’s
Obligation:
This subsection was rewritten to require the Department to also provide the federal
identification numbers, if applicable, with the transmittal of the net proceeds collected to
a claimant agency.
( Effective June 30, 2010; SB 897, s. 31.8.( f); S. L. 10- 31.)